A Shanghai court found the Dazhong Insurance guilty of using illegal copies of Microsoft's software and ordered the insurer to pay $318 000 in damages.
This is the first case in which Microsoft has taken a large Chinese company to court over copyright infringement of its software, the software firm said in a statement.
"It is also the case in which Microsoft has been awarded the largest sum in damages in China so far", the company said.
It is difficult to get tough sentences for counterfeiters in Chinese courts because the burden of collecting evidence rests with software companies, according to the Financial Times.
Chinese anti-counterfeiting organisations have praised the court decision and said it is a sign of Chinese authorities' determination to crack down on piracy.
They estimate that software makers lost $6.67bn in revenue through piracy in 2008, by which time software piracy is believed to have dropped 10% since 2004.
In 2009, Microsoft stepped up its fight against sellers of fake software, leading to four out-of-court settlements with UK computer resellers caught dealing in illegal software in six months.
According to Microsoft, fake software is often bought online and most of it contains viruses and malware. A 2009 Media Surveillance study of several hundred downloaded copies of Windows found that 32% contained malicious code.
This article was first published by Computer Weekly