UPDATE 3-European court's Microsoft ruling Sept 17 -sources

(Adds Commission and Microsoft having no comment, court unavailable for comment)

By David Lawsky

BRUSSELS, June 5 (Reuters) - The European Union's second highest court is expected to rule on Sept. 17 whether the European Commission was right in 2004 to find that Microsoft violated antitrust laws, sources familiar with the matter said.

Sept. 17 is the final working day before the retirement of Court of First Instance President Bo Vesterdorf, who is presiding over the landmark case.

The ruling is expected to clarify whether the European Commission can continue to pursue the case, or whether it must pull back and permit Microsoft (MSFT.O) to continue its business practices.

Neither the Commission nor Microsoft had any comment and the Court was unavailable for comment.

In March 2004, the Commission imposed a record 497 million euro ($657 million) fine on Microsoft and ordered it to change its business practices, ruling the company failed to give other makers of small business servers the information needed to compete with Microsoft's own products.

It also ruled that Microsoft unfairly bundled in its own Windows Media Player audiovisual software, making life difficult for rivals such as RealNetworks' (RNWK.O) Real Player.

Microsoft's business model is to bundle software into its operating system in order to forestall competition, the Commission says.

Changing the business model could threaten Microsoft's 95 percent share of the PC operating system market, the Commission says.

Microsoft says its business model is innovation and that it has a right to add what it wants.

The case is being heard before a special 13-judge Grand Chamber of the Court of First Instance, which conducted hearings on the matter in April, 2006.

The Commission says Microsoft has failed to comply with its 2004 decision, and in July 2006 fined the company 280.5 million euros.

In March this year, the Commission held out the possibility that the company could face further fines.

"In the 50 years of European antitrust policy, it's the first time we've been confronted with a company that has failed to comply with an antitrust decision," said the Commission's competition spokesman Jonathan Todd.