In its decision Thursday, the European Court of Justice spelled out three "exceptional circumstances" that must be met before a dominant company can be found guilty of breaking antitrust law for refusing to license copyrighted material to rivals.
Those circumstances were: if the refusal prevents the emergence of a new product or service for which there is a potential demand; if it has no "objective justification"; and if the license was so indispensable that withholding it could eliminate all competition in the relevant market.
Both the European Union and Microsoft said the decision supported their position.
"We believe that these exceptional circumstances as set out by the court ... have been met too in the Microsoft case," said European Commission spokeswoman Amelia Torres.
A Microsoft statement said: "We do not believe that the commission's case meets with the strict criteria laid out by the court."
The European Union last month slapped a 497 million euro ($596 million) fine on Microsoft for abusing its monopoly on computer operating systems. Its Windows software runs more than 90 percent of the world's personal computers.
Antitrust regulators ordered Microsoft to offer European computer makers a version of Windows stripped of its digital media player software for watching movies and listening to music, and to provide competitors in the low-end server market with more of its underlying software code so they can communicate with Windows-powered desktops as well as Microsoft's own products do.
Microsoft's appeal, expected in June, is expected to argue among other things that the order violates its intellectual-property rights.
Observers said the EU high court's ruling Thursday was not breaking new ground but clarifying existing law_and that it would be up to the appeals court to decide.
"The question is, do the facts in the commission file support the case that this access to the proprietary information is absolutely essential?" said Stephen Kinsella, an antitrust expert at the Herbert Smith law firm in Brussels. "I think it's almost impossible to get a straight answer on that because the only people who have access to the file are those with a vested interest."
Microsoft said the existence of rival server products on the market was proof that it did not need to release more software code.
"It is clear from any view of the market that the Microsoft technologies concerned in the commission's case are not 'indispensable,' in the terms of the court judgment, as competition is flourishing," the company's statement said.
Torres disagreed, arguing that the commission had compiled over five years "a considerable amount of evidence ... that interoperability with Windows is indispensable to compete."
She noted that Microsoft was not the first entrant in the market but quickly gained what the commission found to be a "dominant position'" in workgroup server operating systems. She also insisted the rivals were different in "many aspects," such as "reliability, speed, security."
"Thank God, we believe that in the case of Microsoft, we have intervened when there is still time to save competition in this market," she said.
The ruling from the EU's highest court involved U.S.-based IMS Health Inc., the world's biggest collector of pharmaceutical data, which had refused to license its methods to a competitor, citing copyright protection.
The Luxembourg-based EU high court said it was for the court in Germany that referred the case to decide whether the conditions had been met.