Microsoft’s has lost its attempt to overturn a key ruling in the Windows Vista Capable lawsuit.

The Ninth US Circuit Court of Appeals confirmed the decision in a court order yesterday.

US district judge Marsha Pechman in Seattle, who originally approved the case, had halted proceedings while waiting for a decision from the appeals court, now the software giant faces a class action lawsuit.

Plaintiffs in the case allege that Microsoft artificially inflated demand in the run up to Christmas 2006, by falsely advertising that PCs would be capable of running the full version of the firm’s delayed Vista operating system.

The suit, filed in February, alleges that buyers were deceived because most purported “Vista Capable” PCs bought before the official retail launch in January 2007 could run the stripped-down Basic version of Vista, only.

Some customers felt they had been duped by the sticky labels slapped on PCs that lacked the appropriate hardware to run Vista Premium's memory-intensive media centre, and Aero interface.

Microsoft had disputed, in its petition to the Ninth US Circuit Court of Appeals, two specific points of the case.

First of these was Pechman's decision to bring the class action lawsuit under Washington state law because that's where the firm is headquartered; secondly, it questioned the judge's "price inflation" theory. ®

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