A European court this morning upheld the bulk of an antitrust ruling against Microsoft made by the European Commission in 2004.
The decision follows the European Commission's 2004 findings that Microsoft abused its dominant position in PC operating systems.
The European Court of First Instance in Luxembourg backed the EC’s decision to fine Microsoft a record 497m euros (£345m) and force it to disclose proprietary data, as well as stripping music and video software from a version of its Windows operating system.
But it upheld part of the company's appeal on whether it must pay for monitoring its compliance.
“The commission did not err in assessing the gravity and duration of the infringement and did not err in setting the amount of the fine,” the tribunal said in its judgment.
The ruling may bolster EU antitrust investigations by Competition Commissioner Neelie Kroes, who is also probing Intel, Rambus and Qualcomm.
Both Microsoft and the commission have the right to appeal today's decision at the European Court of Justice, the EU's highest court.
Brad Smith, Microsoft's top lawyer, said: "We'll study this decision carefully and if there are additional steps that we need to take to comply with it, we will take them."
European Commission President José Manuel Barroso welcomed the ruling. "This judgment 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," he said.
The Commission's allies also hailed the decision.
"This is a great day for European businesses and consumers," said Thomas Vinje, who heads the legal team for the European Committee for Interoperable Systems (ECIS). "This decision opens the prospect for dynamic competition in the software industry. No more user lock-in, no more monopoly pricing," he said.
Georg Greve, president of the Free Software Foundation Europe (FSFE), said: "Through tactics that successfully derailed anti-trust processes in other parts of the world, including the United States, Microsoft has managed to postpone this day for almost a decade. But thanks to the perseverance and excellent work of the European Commission, these tactics have now failed in Europe."
Carlo Piana, FSFE's legal counsel, described the court ruling as "a milestone for competition. It puts an end to the notion that deliberate obfuscation of standards and designed lock-in is an acceptable business model, and forces Microsoft back into competing on the grounds of software technology."
Software developer Jeremy Allison, co-author of the open source print and file server Samba, also approved the ruling. "This is a very important day for the Samba team: we hope to finally compete on a level playing field, without being denied access to interoperability information. Samba would then be able to offer consumers real choice, with the benefits of software freedom," he said.
However, an industry group on Microsoft's side said the ruling was bad for small and medium-size enterprises (SMEs).
"The Commission just got a treat from the court, but SMEs and consumers will actually foot the bill. Microsoft did not win today, but it is European software developers and consumers that really lost," said Jonathan Zuck, president of the Association for Competitive Technology.
It wouldtake several hours and days to get a true assessment of the implications, he said, suggesting that the detail of the ruling might yet contain a "silver lining" for SMEs.
"Following today's judgment, consumers and developers are unlikely to see the technologies they are demanding - like voice recognition and multitouch interfaces - integrated into Windows," he said.