Microsoft Senior Vice President and General Counsel Brad Smith called the court ruling disappointing but added that the software giant is "committed to complying with every aspect" of the decision.

The Luxembourg-based court wrote that it agreed with EU regulators who said Microsoft has "abused its dominant position" in the global software marketplace by stifling competition and undercutting innovation efforts by rivals, thus keeping prices excessively high.

Although Smith said the Redmond, Wash., company has not decided whether to appeal the court decision, he appeared far more resigned and conciliatory toward European regulators than in the past when Microsoft accused them of trying to curb innovation by forcing the company to give up its technology secrets.

Smith said at a news conference in Brussels, Belgium, which was carried on Microsoft's Web site, that the decision "very clearly gives the commission quite broad power and quite broad discretion." Although the EU commission's demands cannot be enforced outside Europe, Smith said the implications of the case will affect "our industry and every other industry in the world."

The Federal Open Market Committee was set to announce a decision at 1815 GMT.

The committee was widely expected to cut interest rates in a bid to ease stress in the housing and credit markets, and head off a potential recession.

Most analysts say they expect the FOMC, which has held its federal funds rate at 5.25 percent since June 2006, to cut the benchmark rate by 25 or 50 basis points, which could lead to lower borrowing costs for many consumers and businesses.

A rate cut "would reflect an effort to contain the downside risks to growth associated with the swift tightening in financial conditions this summer in an already subpar economy," said Citigroup economist Robert DiClemente, who predicts a half-point cut.

DiClemente says the current rate of 5.25 percent is "higher than neutral," or holding back economic growth, and that a failure to cut rates "could risk an undesirable breach in investor confidence and broader damage to the expansion."

"The sooner we get to 4.5 percent or thereabouts, the better the chances of stabilizing the economic outlook and the financial system that supports it," DiClemente said.

Rod Smyth at Wachovia Securities said he expects a quarter-point cut, with the possibility of more cuts later.

"We believe Fed chairman (Ben) Bernanke's reluctance to cut rates aggressively is based partly on his preference that markets work out their own problems," he said.

"Furthermore, we think he wants to discourage the view that the Fed will always come to the rescue during periods of financial turmoil."

Some analysts say that if the Fed fails to take bold action such as a half-point cut, it could trigger more turmoil in financial markets, causing more failures of home lenders and mortgage defaults and prompting a freezing up of broader credit markets.

"We strongly believe that if the Fed only cuts rates by 25 basis points even with a strongly worded FOMC statement to commit to more easing if need be, there could be a significant disappointment trade in the financial markets, especially in stocks," said Deutsche Bank economists Joseph LaVorgna and Carl Riccadonna in a note to clients.

"If policymakers move too slowly now, they run the risk that more considerable damage will be inflicted on the financial markets and the real economy, and resultantly they will have to cut rates more aggressively in the long run."

Others claim that economic conditions do not warrant a rate cut, and that such a move would simply be providing more of the easy money that fueled the boom-and-bust cycle.

"The US economy is not booming ... However, the economy is not collapsing either," argued Eugenio Aleman, senior economist at Wells Fargo, who says it would be wrong for the Fed to buckle to market pressure.

"A fed funds cut will not bring back the US housing market. A fed funds cut will not bring back the commercial paper market," he said.

The US economy expanded at a robust 4.0 percent pace in the second quarter, but many experts view that as a statistical fluke that belies soft conditions. The loss of 4,000 jobs in August, say some, point to deep problems as the housing slump and credit problems drag on growth.

Of key importance is the message sent to financial markets. Chairman Ben Bernanke wants to ease economic stress while avoiding the impression that he is bailing out speculators and hedge funds.

"As I see it, the media hype over whether the first move will be 25 or 50 basis points is overblown," said Morgan Stanley economist Richard Berner.

"What matters more than the first move is the future path for monetary policy, and both camps at the FOMC will likely agree that more is needed because like us, they've significantly lowered their sights on future growth."

However, the French foreign minister also said that "everything should be done to avoid war."

"War is the worst that could happen," he said. "Everything should be done to avoid war. We have to negotiate, negotiate, negotiate -- without cease, without rebuff."

His comments appeared aimed at quieting an uproar over his statement Sunday that the world should prepare for a possible war with Iran -- a warning Iranian President Mahmoud Ahmadinejad dismissed Tuesday as fanciful.

Kouchner blamed the media for distorting his statement that "we have to prepare for the worst, and the worst is war."

"As usual with journalists, they take one phrase and you don't know what came after," he told Russia's Echo of Moscow radio late Tuesday.

"They're saying: Bernard Kouchner wants war. But it's not true. It's a manipulation. I don't want war, I want peace."

The Russian and French ministers met ahead of a UN Security Council meeting on Friday that may impose new sanctions against Tehran for its controversial uranium enrichment activity.

Ahmadinejad dismissed talk of war in comments to journalists in Tehran on Tuesday.

"We do not take these declarations seriously. Comments to the media are different to the real positions," he said.

Tehran vehemently denies US accusations it is seeking an atomic weapon, saying its nuclear drive is aimed at generating electricity.

Russia, which is building Iran's first nuclear reactor in the southern Russian city of Bushehr, has consistently warned against attacking the Islamic republic.

In an interview published just ahead of the Kouchner-Lavrov meeting, Russian Deputy Foreign Minister Alexander Losyukov warned that a "bombing of Iran would be a bad move that would end with catastrophic consequences."

The United States has never ruled out using military strikes to punish Iran for defying UN Security Council demands that it halt its enrichment activity. US Defense Secretary Robert Gates said on Sunday that "all options are on the table."

Iran has said it would never initiate an attack but would respond with crushing force if the United States launched a strike on its territory.

Kouchner is set to fly to Washington on Wednesday to take up the issue with US Secretary of State Condoleezza Rice.

Fearing possible military action, Moscow has drawn up plans to evacuate its nuclear experts from Bushehr in the event of a conflict, deputy foreign minister Losyukov said.

He stressed in an interview with daily Vremya Novostei that the use of force would only "worsen the situation in the Middle East" and "bring a very negative reaction from the Muslim world."

On Monday, the UN atomic agency chief warned against the hasty use of force in the Iranian nuclear dispute but dismissed the French comments about possible war as "a lot of hype."

"We need always to remember that use of force could only be resorted to when ... every other option has been exhausted. I don't think we are at all there," ElBaradei told reporters at a conference of his International Atomic Energy Agency (IAEA).

"There is a UN charter and there are rules for the international use of force," ElBaradei said.

Iranian Vice President Reza Aghazadeh told the general conference of the IAEA's 144 member states that Western countries "have always chosen the path of confrontation instead of the path of understanding and cordial relations toward the great nation of Iran."

A series of bombings, meanwhile, ripped through Baghdad, killing at least 18 people and wounding more than 60, police said. The deadliest attack was a car bombing in a parking lot near the Health Ministry and the city's main morgue that claimed seven lives.

The Interior Ministry said Monday that Blackwater — a Moyock, N.C.-based company that protects U.S. diplomats and other dignitaries and projects in Iraq — was banned from working in the country after Sunday's deadly shootings that apparently occurred after a car bombing in western Baghdad.

The shootings have touched a nerve and raised scrutiny over what many Iraqis consider a mercenary force that runs roughshod over people in their own country.

Blackwater is one of three private security firms employed by the State Department to protect its personnel in Iraq, and a decision to force it to pull out would create tremendous difficulties for the U.S. government.

The two other firms, both of which are headquartered in the Washington, D.C., suburbs, are Dyncorp, based in Falls Church, Va., and Triple Canopy, based in Herndon, Va.

Government spokesman Ali al-Dabbagh said he understood the need for protection for Westerners and dignitaries but that preliminary findings showed Blackwater used excessive force.

Citing Interior and Defense ministry initial findings, al-Dabbagh told CNN that more than 20 people were killed. Interior Ministry spokesman Maj. Gen. Abdul-Karim Khalaf, however, said 11 were killed. The discrepancy could not be reconciled.

Blackwater has insisted its employees acted in self-defense and that those killed were armed combatants who threatened State Department personnel.

Both Iraqi officials appeared to soften the government's position after Secretary of State Condoleezza Rice assured Prime Minister Nouri al-Maliki of a fair and transparent investigation.

"We have to protect the people. At the same time we have to show the sovereignty of the government in Iraq," al-Dabbagh told CNN.

But he stressed the ban on Blackwater was temporary pending the final investigation: "We are not intending to stop them and revoke their license indefinitely, but we do need them to respect the law and the regulation here in Iraq."

Khalaf said the important thing was "to know the truth and to protect the rights of the victims and to reach the best means in order to prevent such incidents in the future."

Blackwater and other foreign contractors accused of killing Iraqi citizens have gone without facing charges or prosecution in the past, and it was unclear why the shooting Sunday drew such a fierce reaction by the Iraqi government.

Al-Maliki, under political pressure, may have seen a straightforward way to gain political ground by lashing out at a practice unpopular with all Iraqis. Unlike many deaths blamed on foreign contractors, Sunday's shootings took place in a crowded area in downtown Baghdad with dozens of witnesses.

The Interior Ministry also has recently clamped down on weapons permits for the foreign security companies with a series of conflicting measures that have created some confusion among Iraqi security forces as well as the contractors.

The circumstances surrounding Sunday's attack were uncertain. Blackwater said its employees came under fire.

"Blackwater regrets any loss of life but this convoy was violently attacked by armed insurgents, not civilians, and our people did their job to defend human life," Blackwater's spokeswoman, Anne E. Tyrrell, said in a statement.

U.S. officials said the motorcade was traveling through Nisoor Square on the way back to the Green Zone when the car bomb exploded, followed by volleys of small-arms fire that disabled one of the vehicles.

Al-Dabbagh said the preliminary report by the Interior and Defense ministries showed helicopters fired on the crowd; Blackwater has denied any aircraft were used.

Al-Sadr called for all contracts of foreign securities firms to be annulled and blamed the government for failing to protect Iraqis, noting the shootings occurred on a busy square filled with Iraqi troops.

"This aggression wouldn't have happened had it not been for the presence of the occupiers who brought these companies," al-Sadr's political committee said in a statement issued by his office in the holy city of Najaf.

It also called for a speedy investigation, the referral of those involved to the Iraqi justice system and compensation for families of the victims.

Amid allegations that the foreign security contractors operate with impunity, al-Maliki's Cabinet held a meeting Tuesday and confirmed that "it is necessary to review the status of local and foreign private security companies working in Iraq according to what is suitable with Iraqi laws."

Order No. 17, a law issued by the Coalition Provisional Authority in Iraq before the Iraqis regained sovereignty in June 2004, gave the companies immunity from Iraqi prosecution.

Al-Dabbagh insisted the government was now sovereign and had the right to act against the contractors, "but we don't want to do so because we don't have the services which they are providing for the diplomats and for the American Embassy here in Iraq."

Hassan al-Rubaie, a member of the parliament's Security and Defense Committee, said an investigative committee has been formed and members would consider abolishing the immunity law.

"There are reports that they were subjected to fire but this does not give them the right to kill innocent civilians," he said.

Cheng Cohen LLC, a Chicago-based firm focusing in corporate, franchise, technology and business litigation today announced that Andrew J. Sannes has joined the firm as counsel.

"Andrew's experience in mergers and acquisitions and hospitality will provide a valuable service to our growing client list," said Amy Cheng, partner of Cheng Cohen LLC.  "We welcome Andrew to our firm and his experience and enthusiasm will play an important role in the growth of Cheng Cohen."

Most recently, Sannes was an associate at DLA Piper US where he concentrated his practice in mergers and acquisitions, joint ventures, private equity and general corporate matters. As a member of the Global Hospitality and Resort Group, Sannes has worked with blue chip hotel and resort companies on their business matters from acquisitions, negotiations and all development, financing, and ownership needs.

Sannes is a graduate of the University of Wisconsin-Madison, where he received his Bachelor of Arts in History, and The John Marshall Law School where he received his J.D.

Founded in 2007, Cheng Cohen LLC provides experience in a wide range of legal matters including corporate, litigation and franchising. The firm innovatively tailors legal services to meet each of their clients' specific needs effectively and efficiently.

The court’s presiding judge, Bo Vesterdorf, reading a summary of the decision on his final day in office, said, “The court finds the commission did not err in assessing the gravity and duration of the infringement and did not err in setting the amount of the fine. Since the abuse of a dominant position is confirmed by the court, the amount of the fine remains unchanged.”

“The court said the commission wins on virtually everything,” said Thomas Vinje, a partner at the law firm Clifford Chance and part of the legal team for the European Committee for Interoperable Systems, a coalition that includes Microsoft opponents like I.B.M. “The court has spoken. The commission was right.”

In a statement this morning, the European Union’s competition commissioner, Neelie Kroes, said: “The court has upheld a landmark commission decision to give consumers more choice in software markets. Microsoft must now comply fully with its legal obligations to desist from engaging in anti competitive conduct. The commission will do its utmost to ensure that Microsoft complies swiftly.”

Brad Smith, the general counsel for Microsoft, who was present for the reading, said the company would follow the ruling but did not say specifically whether the company would appeal it.

“It’s clearly very important to us as a company that we comply with our obligations under European law. We will study this decision carefully and if there are additional steps that we need to take, we will take them,” Mr. Smith said.

Robert Kramer, a vice president of public policy for CompTIA, a Microsoft ally that represents 3,000 technology companies, predicted the court’s ruling would have a chilling effect on investment both within the European Union and beyond.

“What this ruling will do is send a message to companies that if they establish a good market position with a successful product, they will be forced in Europe to essentially give up that product to their competitors,” Mr. Kramer said.

But Carlo Piana, a lawyer representing the Free Software Foundation Europe, hailed the court’s decision as a victory for small software developers around the world who may have lived in fear of Microsoft or other large platform operators. “This is an incredibly huge victory. The doors are kept open now for competition,” Mr. Piana said.

The decision followed a five-day hearing on the issues in April. Microsoft has indicated in the past that it would appeal any negative ruling to the European Court of Justice, the highest court in Europe, but Mr. Smith would not say today whether the company would take that step in the two months and 10 days it has to. An appeal by the company, a process likely to take at least two years, would focus only on whether the appellate court erred in procedure in reaching its decision, not on the facts in the case.

Microsoft has already been forced to pay nearly €1 billion in fines in the nine-year-old legal case, which has pitted the software maker based in Redmond, Wash., against the commission and a host of competitors, including I.B.M., Sun Microsystems, RealNetworks and Novell.

In its ruling, the 13-member panel of judges said Microsoft had violated European antitrust law by exploiting its near dominance in operating systems to shut out competitors like RealNetworks in digital media players and Sun Microsystems in workgroup exchange servers.

The ruling validated the pursuit of Microsoft by Mario Monti, former competition commissioner for the European Union, and his successor, Ms. Kroes. The case began in 1998 when Sun Microsystems filed a complaint over Microsoft’s refusal to disclose its confidential server protocols — computer code that competitors need to make their servers or desktop computers work with Microsoft products.

Microsoft has been repeatedly fined by the commission since the 2004 antitrust ruling for inadequately supplying the protocols. “I think this means it’s about time for Microsoft to comply,” Mr. Vinje said.

The commission later expanded its inquiry to include Microsoft’s practice of bundling its Windows Media Player into its dominant Windows operating system. After Microsoft began bundling its media player into Windows, it overtook the market leader, RealNetworks, and as of January it had a 50 percent share of the global market, according to the researcher Nielsen/NetRatings.

“There has obviously been a lot of work that has gone into our efforts to comply with the commission’s terms with respect to communications protocols,” Mr. Smith said in Luxembourg today. “We have made a lot of progress in that regard and yet we all have to acknowledge that there are some issues that do remain open.”

White House spokeswoman Dana Perino said the president hoped the US Senate, controlled by Bush's Democratic foes, would confirm Mukasey to replace the scandal-stained Alberto Gonzales before going into recess on October 8.

Gonzales, a close Bush confidant, left the post under a cloud, with Democratic and Republican critics alike charging that he lacked independence from the White House, was incompetent, hid the truth and may be guilty of perjury.

A former top aide to Gonzales revealed earlier this year that she improperly used political criteria in hiring decisions, and Democrats have been probing whether a mass purge of federal prosecutors was tied to political, not legal, considerations.

The nomination could have far-reaching implications for several pitched battles over Bush administration anti-terrorism policies, like warrantless spying on US citizens.

Democratic Majority Leader Harry Reid said Mukasey had "strong professional credentials a reputation for independence" and suggested the former judge "knows how to say no to the president when he oversteps the Constitution."

"But there should be no rush to judgment. The Senate Judiciary Committee must carefully examine Judge Mukasey's views on the complex legal challenges facing the nation," Reid said in a statement.

Democratic Senator Patrick Leahy, chairman of the Judiciary Committee that will take up the nomination before it goes to a vote, promised to review Mukasey's qualifications "a serious and deliberate fashion."

But in a potential hurdle to Mukasey, Leahy also warned that he would take into account White House "cooperation" on existing requests for information on issues like the mass firings and the warrantless surveillance program.

"The next attorney general needs to be someone who can begin the process of restoring the Department of Justice to its proper mission," Leahy, one of Gonzales's fiercest critics, said in a statement.

At the Rose Garden ceremony, which Gonzales did not attend, Mukasey thanked the embattled official for his "support and encouragement" but did not praise his record or his management of the Justice Department.

Mukasey said the department faced "vastly different" challenges from when he served there 35 years ago "but the principles that guide the department remain the same: To pursue justice by enforcing the law with unswerving fidelity to the Constitution."

Mukasey, 66, was appointed a federal district judge in New York under Republican former president Ronald Reagan and retired in 2006, returning to private practice.

He presided over several high-profile terrorism legal cases, including the trial of Omar Abdel-Rahman, the so-called "blind sheikh" who was convicted as the master of a 1993 attack on New York's World Trade Center towers.

Mukasey generally has been supportive of Bush administration policies in the war on terror, although he has at times ruled against the president.

He served as a district judge in the case of Jose Padilla, the US citizen accused by the Bush administration of being an enemy combatant who conspired to kill Americans overseas.

Mukasey upheld the Bush administration's right to detain Padilla indefinitely without charges -- a decision later reversed -- but ruled that he was entitled to a lawyer -- a position the administration argued against.

"That decision hardly makes Mukasey a wild-eyed civil libertarian," said Mark Agrast, a senior fellow with the left-of-center Center for American Progress think tank in Washington.

"But his insistence that the government give Padilla access to counsel was a rare act of principle at a time when few in Congress or the courts were willing to defy the administration," said Agrast.