In a landmark ruling with key implications for European Union (EU) competition policy, a court in Luxembourg on Monday backed the bloc's decision to inflict a multi-million-euro fine on Microsoft for abusing its dominant position in the software market.
With a sentence read out in a packed court by presiding judge Bo Vesterdorf, the EU's Court of First Instance overturned almost the entire content of Microsoft's appeal against a 2004 ruling by the European Commission (EC).
The court judged that the bloc's executive arm had been right in imposing a 497-million-euro ($689 million) fine - later raised by an additional 280.5 million euros - on Microsoft.
The court also backed its order that Microsoft must give rivals access to some of its codes and sell a "light" version of its Windows operating system, stripped of its media player.
In a statement issued in Brussels, the EC welcomed the ruling.
"This judgement confirms the objectivity and the credibility of the Commission's competition policy. This policy protects the European consumer interest and ensures fair competition between businesses in the internal market," said Jose Manuel Barroso, the Commission president.
Georg Greve, president of the Free Software Foundation Europe, called it "a screaming victory for Europe", while Microsoft's chief defence lawyer, Brad Smith, said he would need time to read the 1373- paragraph-long judgement in full before deciding on whether to file an appeal.
"One needs to step back and read first, think second and decide third," Smith told reporters in Luxembourg.
Jonathan Zuck, a representative of a group of small- and medium- sized US information technology companies, said the ruling would make its members "very concerned about the implication of this case for the protection of intellectual property in Europe."
"This is a completely haphazard treatment of intellectual property owned by Microsoft. This is a very bad precedent for all the European industry and possible investment by small and medium sized companies in Europe," said Zuck, whose Association for Competitive Technology (ACT) had been supporting Microsoft in Luxembourg.
Microsoft is the world's largest software company and its Windows operating system is used by about 95 per cent of the world's computers.
On March 23, 2004, the EC ruled that Microsoft had carried out anti-competitive practices by refusing to allow its trade rivals access to so-called "interoperability" protocols - instructions needed by servers to work effectively with Windows.
The EC also objected to Microsoft's decision to bundle its own media player with the operating system, arguing this would drive other producers like Real Networks' Real Player out of the market.
The EC, therefore, fined Microsoft and ordered it to offer a version of Windows for sale without the media player. It also forced it to make its interoperability protocols available at a fair price.
The EU court decision leaves all of those measures in place.
However, the court did annul one minor EC decision establishing an independent trustee charged with overseeing the company's cooperation with the order to make its protocols available.
Monday's ruling was seen by officials in Brussels as confirming the EU's power to enforce its antitrust policy and was expected to have important implications on similar cases involving other information technology companies.