If upheld, the ruling could have far-reaching implications for the future of investment banking research in Europe.

The decision comes on the heels of a groundbreaking agreement between investment banks and U.S. regulators. As part of that deal, Morgan Stanley paid $125 million to settle charges that its investment banking division influenced equity research.

LVMH had originally sought 100 million euros, or $127.5 million, in damages when it alleged that Morgan Stanley analyst Claire Kent repeatedly disparaged it in research reports and comments to the press in order to curry favor with investment banking client Gucci Group.

Morgan Stanley president Stephan Newhouse said yesterday's ruling by the Paris Commercial Court set a dangerous precedent. "This opens the floodgates for companies to use the threat of legal action to persuade analysts only to make positive statements about them," he said in a statement.

Morgan Stanley plans to appeal the ruling.

For its part, LVMH, which is headed by Bernard Arnault, hailed the decision as a breakthrough for analyst independence. "It means the debate concerning the Chinese wall has crossed the Atlantic," an LVMH spokesman said.

To some extent, the 14-month legal battle is another chapter in a long-simmering feud between LVMH and Gucci.

LVMH's 1999 attempt to take control of Gucci sparked a hostile battle for the company - one that LVMH ultimately lost to rival Pinault Printemps Redoute.

Throughout that battle, Morgan Stanley served as a financial adviser to Gucci. That relationship, argued LVMH, may have colored Kent's research.