The European Court of First Instance dealt a blow to Microsoft on Wednesday, ordering the company to start offering a version of Windows without a bundled-in media player.
Bo Vesterdorf, the court's president, said that Microsoft must comply with penalties the European Commission imposed in March even as the company's appeal wends its way through the system.
The Commission ruled in March that the software giant used its monopoly in operating systems to try to manipulate the markets for media players and workgroup server operating systems. It ordered the company to offer a version of Windows without its bundled media player and to share more technical detail with rivals -- orders that will now go into effect.
The court said in a press release: "The evidence adduced by Microsoft is not sufficient to show that implementation of the remedies imposed by the Commission might cause serious and irreparable damage."
Microsoft had already covered the monetary portion of the penalties, depositing 497m euro in an escrow account. The other requirements were temporarily suspended after the company requested an emergency stay.
The software maker said that despite the ruling it was "encouraged" by aspects of the Court's discussion of the merits of the case.
Microsoft said: "While the Court did not find immediate irreparable harm from the Commission's proposed remedies, the Court recognised that some of our arguments on the merits of the case are well-founded and may ultimately carry the day when the substantive issues are resolved in the full appeal."
The company also held out hope the ruling could lead to renewed settlement talks.
"We are hopeful that the issues highlighted by the Court will create an opportunity for the parties to discuss settlement," Microsoft said. "As we have always stated, we believe that there are better ways to address such complex and technical issues, with a minimum of harm to European consumers and the European technology sector."
Microsoft had engaged in settlement talks just before the European Commission ruled in the spring, but the talks ultimately broke off.
In its US antitrust case, Redmond eventually reached a settlement with the Department of Justice.
A European Commission spokesperson was not immediately available for comment.
The court sets a high standard for those trying to get a stay of an order while an appeal is pending. Plaintiffs must show both the urgency of the need for a stay as well as the fact that such urgency outweighs the public interest of seeing the penalties imposed. Only points of law can be appealed.
In its ruling, the court said Microsoft had not demonstrated the necessary urgency: "After examining the circumstances of the case, the President finds that Microsoft has not shown that it might suffer serious and irreparable damage as a result of implementation of the contested decision."
The company, however, has the right to appeal the decision to the president of the European Court of Justice. That process can take from three weeks to a couple of months, depending on the complexity of the case, European legal experts said.
A European antitrust attorney whose firm is involved in the case: "I would advise Microsoft to appeal if I was representing them. There is no downside. There may be a chance the upper court will rule differently."
An appeal of Wednesday's ruling would be dealt with long before the Microsoft appeal on the antitrust ruling goes before a judge, which could take up to a couple of years, European legal experts said. During that time, legal and industry experts noted, much could change in the technology world.
The Association for Competitive Technology, a trade group that has sided with Microsoft in the case, criticised the ruling, saying it will harm consumers and small software developers.
ACT president Jonathan Zuck said in a statement: "While intended to constrain Microsoft, the Commission's sanctions will impose billions of dollars in new costs on small software developers and consumers, and threaten the future of innovation."
