An extraordinary ruling declared today in a Mannheim court has resulted in a ban on selling Xbox 360 consoles throughout Germany.
Microsoft will no longer be able to distribute the console to retailers, and may be forced to recall systems sitting on shop shelves and have them destroyed.
The ruling will not come into effect until Microsoft’s appeal process has concluded.
Also banned is Windows 7 OS discs, as well as the electronic distribution of Internet Explorer and Windows Media player.
The shock ruling is due to Motorola Mobility, a phones company which Google is in the process of acquiring, today being granted an injunction against the distribution of key Microsoft products in Germany.
Motorola Mobility, which last year posted an annual loss of $145 million, was successful in convincing the court that Microsoft had infringed two patents central to the H.264 video coding and playback.
"We are pleased that the Mannheim Court found that Microsoft products infringe Motorola Mobility's intellectual property,” Motorola Mobility said in a statement.
The company said it was still keen on resolving the matter, but Microsoft believes that meeting all demands would cost it about $4 billion each year.
"This is one step in a long process, and we are confident that Motorola will eventually be held to its promise to make its standard essential patents available on fair and reasonable terms for the benefit of consumers who enjoy video on the web," a Microsoft spokesman told the BBC.