Handing Microsoft a major victory in its antitrust case, a federal appeals court has vacated a lower court's ruling calling for the breakup of the software titan. The decision comes almost exactly a year after a federal judge ruled that Microsoft violated antitrust laws by exploiting its monopoly in the market for operating systems to capture the market for Web browsers. As a remedy, US District Judge Thomas Penfield Jackson had said the company should be split into two pieces: One would focus on operating systems, and the other would develop applications and other products. In Thursday's unanimous decision, a federal appeals court vacated that order and sent the decision back to the lower court. In addition, the court determined that the case should be heard by a new judge rather than by Jackson. News of the ruling sent Microsoft shares up $3.82 to $74.69 in early trading. The decision, rendered by the US Court of Appeals for the District of Columbia Circuit, is the latest step in a process that has gone on for years. In April 2000, Jackson ruled that Microsoft violated two sections of the 1890 Sherman Act. Jackson concluded that Microsoft was a monopoly that used anti-competitive means to maintain its dominance in Intel-based operating systems. The judge also determined that Microsoft illegally tied its Internet Explorer Web browser to Windows 95 and 98 and that the company attempted to extend its operating system monopoly to the browser market. Two months later, Jackson ordered that Microsoft be broken into separate operating system and software application companies. He stayed that order and restrictions on Microsoft's business practices pending appeal. Microsoft appealed the decision, and the case traveled to the current court. In an unprecedented move, the full panel of eligible judges was appointed to hear the case, rather than just a three-judge panel. Thursday's decision was not entirely surprising, although most court watchers did not expect a unanimous decision. During oral arguments in February, the panel of seven appeals judges pounded both Microsoft and government attorneys with questions, revealing shaky four to three majorities on many claims. Some judges also lambasted Jackson's handling of the case, particularly statements published in the media after his breakup order. Four of the seven jurists were appointed by Republican Presidents Ronald Reagan or George Bush: Douglas Ginsburg, Raymond Randolph, David Sentelle and Stephen Williams. Democrats Jimmy Carter and Bill Clinton appointed the remaining judges: Harry Edwards, Judith Rogers and David Tatel. The Justice Department and 19 states must decide how they will handle the ruling. One choice is to appeal the case to the Supreme Court, but University of Baltimore Law School professor Bob Lande and Andy Gavil, an antitrust professor at Howard University School of Law, are not convinced that the DOJ under the leadership of John Ashcroft will appeal. "There's no question the political climate in Washington is much better for Microsoft than it was six months ago," Lande said. "There's a good chance there will be a negotiated settlement on easier terms favorable to Microsoft." But legal analysts also say the Bush administration is unlikely to expend political capital by getting actively involved in the case and may be reluctant to pursue additional matters. "The new administration might be less inclined to be perceived as doing battle for competitors that are perfectly able to defend themselves," Gavil said. The states have indicated that they will appeal the decision, even if the DOJ seeks and reaches a settlement with Microsoft. But Lande thinks they will have a tough time going to the Supreme Court alone. "If you have the government and Microsoft on one side and the states on another, it's much more difficult for the case to go on -- not impossible, but extremely difficult," he said. One other scenario is that either the DOJ or the states could drop the case altogether, but that is unlikely. The government has never dropped a case on appeal after getting a victory at the trial court, Gavil said. Read the full history of the DoJ's case against Microsoft in ZDNet UK's DoJ/Microsoft News Section. Have your say instantly, and see what others have said. Click on the TalkBack button and go to the Microsoft forum. Let the editors know what you think in the Mailroom. And read other letters.