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Microsoft has lost a legal battle to trademark 'Skype' in Europe because it sounds too similar to 'Sky'.

A European court ruled that the similarity was likely to cause confusion among customers between the online video chat service and BSkyB's satellite TV and broadband service.

The legal squabble started back in 2005 when the broadcaster complained that Skype's branding was too similar to Sky's.

Microsoft will appeal against the court’s decision.

"We're confident that no confusion exists between these brands and services and will appeal," a Microsoft spokeswoman told BBC News. "This decision does not require us to alter product names in any way."

Sky said the case relates to a "long-running dispute over the extension of its trademark applications to cover a broad range of goods and services that overlap with Sky's own trademark registrations" - particularly TV-related products and services.

Theoretically this ruling gives Sky the right to try and get Microsoft to pay a licensing fee to use the Skype name.