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In a stinging rebuke to the world’s largest software maker, the second-highest European court rejected today a request by Microsoft to overturn a 2004 European Commission antitrust ruling that the company had abused its dominance in computer operating systems. The European Court of First Instance, in a starkly worded summary read to a courtroom of about 150 journalists and lawyers here, ordered Microsoft to obey a March 2004 commission order and upheld the €497.2 million, or $689.4 million, fine against the company.

The court’s presiding judge, Bo Vesterdorf, reading a summary of the decision on his final day in office, said, “The court finds 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. Since the abuse of a dominant position is confirmed by the court, the amount of the fine remains unchanged.”

“The court said the commission wins on virtually everything,” said Thomas Vinje, a partner at the law firm Clifford Chance and part of the legal team for the European Committee for Interoperable Systems, a coalition that includes Microsoft opponents like I.B.M. “The court has spoken. The commission was right.”

In a statement this morning, the European Union’s competition commissioner, Neelie Kroes, said: “The court has upheld a landmark commission decision to give consumers more choice in software markets. Microsoft must now comply fully with its legal obligations to desist from engaging in anti competitive conduct. The commission will do its utmost to ensure that Microsoft complies swiftly.”

Brad Smith, the general counsel for Microsoft, who was present for the reading, said the company would follow the ruling but did not say specifically whether the company would appeal it.

“It’s clearly very important to us as a company that we comply with our obligations under European law. We will study this decision carefully and if there are additional steps that we need to take, we will take them,” Mr. Smith said.

Robert Kramer, a vice president of public policy for CompTIA, a Microsoft ally that represents 3,000 technology companies, predicted the court’s ruling would have a chilling effect on investment both within the European Union and beyond.

“What this ruling will do is send a message to companies that if they establish a good market position with a successful product, they will be forced in Europe to essentially give up that product to their competitors,” Mr. Kramer said.

But Carlo Piana, a lawyer representing the Free Software Foundation Europe, hailed the court’s decision as a victory for small software developers around the world who may have lived in fear of Microsoft or other large platform operators. “This is an incredibly huge victory. The doors are kept open now for competition,” Mr. Piana said.

The decision followed a five-day hearing on the issues in April. Microsoft has indicated in the past that it would appeal any negative ruling to the European Court of Justice, the highest court in Europe, but Mr. Smith would not say today whether the company would take that step in the two months and 10 days it has to. An appeal by the company, a process likely to take at least two years, would focus only on whether the appellate court erred in procedure in reaching its decision, not on the facts in the case.

Microsoft has already been forced to pay nearly €1 billion in fines in the nine-year-old legal case, which has pitted the software maker based in Redmond, Wash., against the commission and a host of competitors, including I.B.M., Sun Microsystems, RealNetworks and Novell.

In its ruling, the 13-member panel of judges said Microsoft had violated European antitrust law by exploiting its near dominance in operating systems to shut out competitors like RealNetworks in digital media players and Sun Microsystems in workgroup exchange servers.

The ruling validated the pursuit of Microsoft by Mario Monti, former competition commissioner for the European Union, and his successor, Ms. Kroes. The case began in 1998 when Sun Microsystems filed a complaint over Microsoft’s refusal to disclose its confidential server protocols — computer code that competitors need to make their servers or desktop computers work with Microsoft products.

Microsoft has been repeatedly fined by the commission since the 2004 antitrust ruling for inadequately supplying the protocols. “I think this means it’s about time for Microsoft to comply,” Mr. Vinje said.

The commission later expanded its inquiry to include Microsoft’s practice of bundling its Windows Media Player into its dominant Windows operating system. After Microsoft began bundling its media player into Windows, it overtook the market leader, RealNetworks, and as of January it had a 50 percent share of the global market, according to the researcher Nielsen/NetRatings.

“There has obviously been a lot of work that has gone into our efforts to comply with the commission’s terms with respect to communications protocols,” Mr. Smith said in Luxembourg today. “We have made a lot of progress in that regard and yet we all have to acknowledge that there are some issues that do remain open.”

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