For all but three of the past 17 years, Microsoft has been involved in antitrust litigation with government agencies. That’s enough to wear anyone down. But as Europe’s highest appeals court delivered its judgement on Monday, I did notice some ennui – not from dogged old hacks, but from a new generation of pundits.

Take this example from former teenage dot.commer Benjamin Cohen – who was six when FTC first trained its lawyers on Redmond. After taking a pop at the at “anti-Microsoft lobby”, he declared on the Channel 4 News website:

The judgement is based on an old case and in many ways an old world – where Microsoft really was the dominant player in information technology

Stop kicking the kindly old man in the Windows outfit, he said.

It’s hard for it to have too much relevance today.

You’d think from this brilliant piece of insight, that there is hardly anyone left who uses Microsoft Windows or Office. Maybe, like the Acorn Archimedes, it’s a hobbyist system lovingly kept alive by a few, devoted enthusiasts! Benji even sounded slightly resentful at being torn away from Facebook (or Sadville) for a few minutes, to write about this piece of computer history.

But the question of “how we deal with Microsoft” is more relevant than ever for two very important and reasons: the second follows from the first.

It’s Microsoft’s game

Firstly, the proportion of national wealth that goes to Microsoft is higher than ever. More people have Windows PCs at home, and as more countries acquire more PCs, so the dependence on Microsoft software grows. As a measure of how much, look at the earnings. Microsoft earned $36bn in 2004, and is projected to earn $63bn in FY 2009. Some “declining relevance”.

In addition, Microsoft now has the desktop computing franchise for as long as it wants it – because its rivals have given up and gone home, or carefully avoid competing too hard with it. This is a hard truth for many people to accept.

Linux has failed to compete on the desktop because it isn’t up to the task of being a consumer operating system, and Apple avoids competing because its focus is on digital media, and the Mac is a nice little earner as it is. Why should it rock the boat?

These days, Steve Jobs is a director at Disney – and Apple isn’t even called “Apple Computer” any more.

Even with Mark Shuttleworth’s benevolence, Ubuntu is still a long way from providing the ordinary user from a drop-in Windows replacement.

And Microsoft has countered the threat of the institutional adoption of Linux, particularly in emerging markets, by lowering the price. Few could would have predicted a few years ago that China and India would go Windows. Few anticipated Western public sector bodies continuing to pay large license fees to Redmond. But a slightly lower license cost, and the more abstract notion of “software freedom”, weren’t enough to win the day for F/OSS.

As the FSJ [aka Forbes‘ Daniel Lyons] wrote recently:

You’ve lost. You’ve had sixteen years to try and build a desktop operating system, and you still can’t get your shit together. Nobody wants your software. It’s not Microsoft’s fault. It’s yours.

All of which makes Apple’s position all the more frustrating. For a small premium it offers a substantially better and more secure experience than Windows. When ordinary users and businesses have the chance to use it, they like what they see. They’ll typically opt for Windows, however, with consumers put off by the perceived price difference and the Mac’s niche status, while enteprises are wary of lock-in to a single hardware vendor – especially with Apple dropping the “Computer”.

… and Apple won’t play

Yet Apple could remedy both if it embarked on a carefully selective licensing program, and permitted chosen OEMs to offer the Mac in more diverse forms. The company has never been in a position to do so before. Today, it can: in the last quarter Apple earned $2.53bn from computer sales, while $2.17bn came from iPod and music and phone products – and this before selling 1m iPhones.

It isn’t hard to envisage Mac OS X reaching 25 per cent market share – which would address the last remaining reason for choosing Windows: there’s more good specialist software written for it. But Apple won’t allow it. With the Mac it’s not a case of “can’t compete”, but “won’t compete”.

But ahh, you say – what about some great paradigm shift? Twenty years ago the PC wrenched control of the industry from IBM and other big vertically integrated companies, and handed it to Microsoft and Intel. What Nick Carr calls “The Big Switch” may make expensive desktop computers redundant. Just as Marc Andressen promised to make Windows “a poorly debugged device driver layer”, Google’s service bureau model of computing promises to make a PC an off-line backup, for those rare moments when the network goes down.

Well, we were here before with thin clients, and today it’s called SaaS, or software as a service – and each time the economics are compelling. This time there’s evidence of some steak behind the sizzle: Salesforce is a great example of businesses doing more work in a bureau model. But to think of one model entirely superseding another is quite wrong: IBM is still here, and the unique flexibility of the PC means it will be around for a very long time too.

In addition, the sheer inefficiency of the browser-based “Web 2.0” environment (Yahoo! 2.0-ified Mail Beta brings a dual core PC to its knees) pretty much guarantees you need some hefty hardware. So for the foreseeable future, SaaS services will be another application you run on your PC.

And once you’ve got a PC, you’ve got Windows. Now what?