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On the first day of the appeal hearing at the Court of First Instance, James Flynn, a lawyer representing the anti-Microsoft trade group ECIS, produced internal Microsoft memos that suggested the company had deliberately set out to eliminate RealNetworks from the streaming video market.

Reuters reports that the memo suggested to Microsoft chairman Bill Gates that the strategy that had successfully been deployed to 'crush' the Netscape Web browser could also be applied to tackle Real's then dominant position in streaming media.

'Change the rules: reposition streaming

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media battle from Network vs. Real to Windows vs. Real," using the same strategy used by Internet Explorer to defeat Netscape,' the memo said.

Microsoft began its appeal by arguing that the EU has misunderstood the thriving competition in the software market.

Its lawyer Jean-Francois Bellis told the 13 judges in the court that consumers had benefited from Microsoft's improved Windows and that competition in the streaming audiovisual software industry is thriving.

Bellis cited Apple's thriving iTunes service and the Flash player as examples of the breadth of competition.

But commission lawyer Per Hellstrom said that iTunes is not a fully fledged streaming media player.

'It does not compete with Windows, he said, 'The fact that Apple moved away from competing with Microsoft head-to-head into the music service business does not contradict foreclosure; it confirms it.'

While the commission defended its decision to force Microsoft to release a version of Windows - XP N - stripped of media player functionality, Bellis noted that no computer makers had opted to install it and fewer than 2,000 copies had been shipped to retail.

'One cannot exclude the possibility that some consumers may have bought Windows XPN to have a souvenir,' Bellis said, saying that it is the only version of Windows not designed by Microsoft.