Microsoft has been found guilty of violating the US federal Sherman Anti-trust Act, in a ruling handed down by Judge Thomas Jackson earlier this morning.
Jackson found Microsoft used its position to monopolise the web browser market to the detriment of competitors.
According to officials, the software company could also face similar charges under state anti-competition laws.
Microsoft plans to appeal the ruling of US District Court Judge Jackson, and suggests the judgment was not unexpected, but will continue with business as usual, promoting innovation as its number one priority.
Issuing his "conclusions of law" in the US Government's antitrust case against the software maker, Jackson ruled that "Microsoft maintained its monopoly power by anti-competitive means and attempted to monopolise the web browser market", in violation of the Sherman Antitrust Law.
The judge also ruled that Microsoft's tying of its Internet Explorer web browser to the Windows operating system was illegal, and found that the software maker broke various US state laws as well as federal laws. The US Department of Justice (DOJ), 19 US state attorneys general and the District of Columbia are plaintiffs in the case.
Microsoft says it will request an expedited review by the US Court of Appeals, following a remedies phase and final decree. The appeal will stress a 1998 US Court of Appeals decision that affirmed Microsoft's right to support the internet in the Windows operating system.
Not surprisingly, Microsoft's leadership is broadcasting its strengths and confidence that it has a strong case on which to base an appeal. Chairman Bill Gates said Microsoft did everything it could to settle the case, and would "continue to look for new opportunities to resolve it without further litigation".
"The Appeals Court already has affirmed Microsoft's right to build internet capabilities into the Windows operating system to benefit consumers. Microsoft's past success has been built on innovation and creativity and our future success depends on our (Microsoft's) ability to keep innovating in the fastest moving marketplace on earth," Gates said.
Microsoft's president and CEO, Steve Ballmer, added his voice to the anthem of truth and conscience, suggesting that the organisation recognised that industry leadership incorporated "opportunities and responsibilities".
"Our mission and success has come from the incredible benefits that Microsoft and Windows creates for consumers and for thousands of other companies, while operating our company based on a set of values that include integrity, innovation, customer focus, partnership with a wide range of companies, an entrepreneurial culture, encouraging and supporting our people, promoting a diverse workplace and giving back to the community," Ballmer said.
Microsoft's executive vice president for law and corporate affairs, Bill Neukom, cited a previous Appeal Court ruling indicating that "it is a mistake for government regulators or the courts to try to design high-technology products, as grounds for the latest appeal.
"Government regulation of software product design would surely slow innovation and harm consumers. It's important for people to understand that today's court ruling is just one step in a legal process that could last several years," he said.
Neukom blamed divisions between the Department of Justice (DOJ) and the US states, and their "extreme demands for making settlement of the dispute impossible".
Judge Jackson concluded that Microsoft's marketing arrangements with other companies were "lawful" and its agreements with distributors did not deprive Netscape of the ability to have access to every PC user worldwide, to offer an opportunity to install Navigator (Netscape's competitor to Microsoft's Internet Explorer).