While Microsoft cracks down on software pirates the world over, the software giant itself was quietly convicted of piracy charges in France last autumn — and the case, while supposedly under appeal, may cost the company some business.

The French division of Microsoft is facing a fine of about £290,000 for illegal use of another company's source code in an animation program called Softimage 3D. The program has been used to create such films as The Matrix, Men in Black, and Star Wars.

But the dispute itself was cited by a governmental buyer who contends Microsoft should not complain about pirates when it is guilty of the same transgression. Microsoft did not respond to requests for comment.

The issue started in 1995 when Microsoft France purchased Softimage, a Canadian company that developed the 3D CGI (computer generated imagery) animation program Softimage 3D. The acquired company was accused of illegally lifting source code from a proprietary program called Character, developed by the owners of Syn'x Relief, a company near Paris.

In 1994, Softimage had negotiated with Syn'x about integrating parts of the Character program into Softimage 3D. But the deal fell through when Softimage demanded all rights to the code, according to a report in Malta's PC World magazine.

In 1995, when Syn'x severed its relationship with Microsoft-Softimage, the company assured Syn'x that it had removed "some or all" of Character from its software. But Syn'x charges that Microsoft-Softimage removed only one part of the code, and retained eight other functions that Character's developers had registered with the French National Intellectual Property Institute.

After Syn'x sent two letters to Softimage and Microsoft demanding the functions be removed, the company filed suit. In 1998, Microsoft sold Softimage to Avid Technologies but remained responsible for the legal infringements of its former wholly owned subsidiary.

Although Syn'x eventually fell into bankruptcy as a result of the case, the program's authors continued their fight. Last September the Commercial Court of Nanterre, France, awarded Syn'x the judgment for damages and interest. Microsoft has vowed to appeal the decision.