| || Microsoft will have to offer Windows without Media Player |
The European Court of First Instance upheld the ruling that Microsoft had abused its dominant market position.
A probe concluded in 2004 that Microsoft was guilty of freezing out rivals in server software and products such as media players.
Microsoft has two months to appeal at the European Court of Justice.
"The Court of First Instance essentially upholds the Commission's decision finding that Microsoft abused its dominant position," the court's statement said.
Microsoft's top lawyer said it was important now for the company to comply with EU competition law, but that it had not yet decided on its next legal steps.
It threw out just one small part of the European Commission's ruling, which had established an independent monitoring trustee to supervise Microsoft's behaviour.
| || The court has upheld a landmark commission decision to give consumers more choice in software markets |
Competition commissioner Neelie Kroes
"The Court criticises, in particular, the obligation imposed on Microsoft to allow the monitoring trustee, independently of the Commission, access to its information, documents, premises and employees and also to the source code of its relevant products," it said.
Microsoft has now been ordered to pay 80% of the Commission's legal costs, while the Commission has to carry a specific part of Microsoft's costs.
The Commission welcomed the verdict. It will give its competition commissioner Neelie Kroes a much needed boost, after her office lost several high-profile anti-trust cases.
Ms Kroes described the victory as "bittersweet", saying that software customers still have no more choice than they did three years ago.
The 2004 ruling ordered Microsoft to ensure its products could operate with other computer systems by sharing information with rival software companies.
It was also ordered to make a version of its Windows operating system available without Microsoft's Media Player software.
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HAVE YOUR SAYThe EU is making an example of a strong US company - that's all it is
Monday's ruling upheld that order, saying it was "beyond dispute" that Microsoft obliged customers to buy its Media Player software along with the operating system.
Last year, Microsoft was told to pay daily fines adding up to 280.5 million euros over a six-month period, after it failed to adhere to the 2004 decision.
Michael Reynolds, of law firm Allen & Overy, said the important thing was "that these principles of the judgement will not just apply to the Microsoft case".
"They will apply to any dominant company that engages in the same behaviour. It's not just about Microsoft," said Mr Reynolds.
"It provides legal certainty now as to what you can and you can't do in relation to information you have to make available to companies who compete in your environment to enable them to be a viable competitor," he added.
"The court has upheld a landmark commission decision to give consumers more choice in software markets," Ms Kroes said in a statement.
"Microsoft must now comply fully with its legal obligations to desist from engaging in anti-competitive conduct."