Microsoft must face a New York lawsuit alleging monopolistic business practices, despite a lower court's decision that the class-action suit against the company should be thrown out.

A statement from the New York appeals court read: "Microsoft's end-user licence agreements with its prime customers, the computer manufacturers and distributors, insulate it only from product defect claims, not consumer injury complaints predicated upon claims of monopolistic and deceptive conduct," reports Cnet.

Microsoft's Stacy Drake, told Cnet: "We're disappointed in the ruling, but we will continue to defend ourselves against these meritless claims."

The New York case was filed by law firm Milberg Weiss Bershad & Schulman and contends Microsoft violated section 349 of the state's general business code which prohibits "deceptive acts or practices in the conduct of any business, trade or commerce".

Microsoft is accused of entering into secret agreements with computer makers to suffocate the competition and create "applications barriers" in its Windows operating system. The suit alleges that those practices, which Microsoft denies, resulted in higher prices for New York consumers, says Cnet.