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Microsoft and the European Commission will on Monday square off before Europe’s second-highest court as their battle over the landmark antitrust ruling issued by the regulator two years ago reaches its decisive stage.

The world’s largest software company has called on the European Court of First Instance to overturn the Commission ruling, which found Microsoft guilty of abusing its dominant market position and imposed a record €497m ($613m) fine.

The Luxembourg court will conduct a week-long hearing to examine the appeal, but is not expected to give its verdict before next year.

Microsoft’s lawyers will argue that the Commission’s decision contained fundamental flaws in its economic and legal analysis and wrongly impinged on the group’s intellectual property.

“This case raises important questions not only for Microsoft, but for companies across the technology sector and beyond. At issue is whether companies can improve their products by developing new features, and whether a successful company must hand over its valuable intellectual property to competitors,” the group said.

But the Commission is certain to launch a vigorous defence of its decision, which it is keen to use as a precedent for further investigations against the US software group.

The Ecis industry association, one of the Commission’s supporters that represents IBM, Oracle, Nokia and others, said the stakes were high. “This case is about establishing rules of the road for a company that has massive market power in a critical market,” said Thomas Vinje, a partner at Clifford Chance who represents Ecis. He added that without the precedent there would be an “elimination of competition in a whole range of markets”.

At the heart of the dispute lies the Commission ruling of March 2004 that found Microsoft had illegally used its monopoly in desktop operating systems to shut out competition in adjacent markets such as media players and server software.

Microsoft’s lawyers are expected to argue this week that the regulator’s analysis was flawed and that the market reality at the time – and the way the market has developed since – contradict the Commission’s findings.

The group is expected to point to the runaway success of Apple Computer’s iTunes as evidence that Microsoft’s practices did not foreclose competition in the market for internet-based music sales.

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