The US Court of Appeals for the District of Columbia has rejected Microsoft's request for a rehearing.
The court said that the software giant illegally "commingled" its operating system and browser code.
The software maker's bid to reverse a ruling handed down last month was denied, affirming that the company illegally tied its software code for the Windows operating system to its Internet Explorer Web browser.
No fast track In an order, the court also denied the request of the US Department of Justice (DOJ) to fast track the case back to the US District Court in Washington, leaving the remand schedule on the original timetable for a hearing on August 12.
The federal appeals court overturned the order to break Microsoft up into two separate companies on June 28. However, it upheld the court's opinion that Microsoft was an illegal monopoly, and that it had used its monopoly power to squash competition by bundling Internet Explorer and Windows 98.
Business plan The issue of commingling code is central to the DOJ case against Microsoft, and forms the basis for their desire to break the company into two parts - one for the operating system business, and one for everything else.
Subsequent to the June ruling, Microsoft began to change its licensing policies for computer makers planning to install Windows XP - the next generation of its operating system due for release later this year.
Citing the ruling, it said computer makers could choose the icons that will appear on the Windows desktop, and would add an add-remove function to allow consumers to remove Internet Explorer from the computer. The company is still locked in combat with AOL Time Warner over exactly what icons will be allowed on the desktop when Windows XP computers ship, however.