Microsoft may not have to split up, but the U.S. Court of Appeals' ruling was by no means a total victory for the software giant.

While lambasting the conduct and bias of U.S. District Court Judge Thomas Penfield Jackson, the U.S. Court of Appeals upheld that Microsoft violated key tenets of the Sherman Antitrust Act and supported "limited liability" for illegally maintaining a monopoly.

The court then remanded the case back to the U.S. District Court to determine remedies and further deliberate other charges that it determined were not sufficiently evidenced by the court record.

That ruling gives the U.S. Justice Department and state attorneys general who first brought the suit in May 1998 plenty of ammunition to impose strict conduct remedies on Microsoft.

The Justice Department--under a more conservative management from the one under former Assistant Attorney General Joel Klein, who vigorously prosecuted this case--issued the following statement after the ruling:

"We are pleased that the Court of Appeals found that Microsoft had engaged in illegal conduct to maintain its operating system monopoly. We are reviewing the court's opinion and considering our options."

Other industry observers and solution providers called the decision as much a victory for the U.S. government as for Microsoft.

"We applaud the Court of Appeals decision today in finding that Microsoft possesses monopoly power, and that Microsoft repeatedly and unlawfully used its monopoly power in violation of Section 2 of the Sherman Act," said Ken Wasch, president of the Software & Information Industry Association. "The court found that the Justice Department demonstrated harm to competition and that Microsoft's explanation for its exclusive dealings were woefully inadequate. The Court of Appeals has now joined the U.S. Department of Justice, the District Court and most of the information technology industry in recognizing that Microsoft's business practices are not just business as usual, but rather a clear and demonstrated violation of red letter law."

"I believe that Microsoft needs to have some restraints placed on its conduct," said Joe Ivison, CEO of Superior IS, a Houston-based provider of e-commerce solutions.

SIIA's Wasch agreed, noting that conduct remedies must be enforced vigorously. "Over the course of this trial, Microsoft has reinforced its monopoly position, on the desktop and beyond. Microsoft's pattern of behavior must be broken if we are to protect consumers and restore competition and innovation. The court recognized that the passage of time or changes in technology will not solve this problem, as Microsoft claims. Rather, it will take strong action to restore competition and deny Microsoft, as the law requires, the ability to continue to benefit from its illegal practices. On remand, we expect the U.S. Justice Department to take the court's decision to heart and propose remedies that will prevent Microsoft from leveraging the monopoly in the Windows operating system into other products and services."

Microsoft has not yet issued a formal response to the ruling.