The Ethical Coffee Company (ECC ) on Tuesday said a French court had ordered Swiss food giant Nestle to pay it 500,000 euros ($680,000) in damages for criticising their coffee capsules.
ECC, which is also based in Switzerland, had accused Nestle's Nespresso division of intentionally casting doubts in the public mind about the quality, coffee-machine compatibility, safety and biodegradable nature of its capsules.
A Paris commercial tribunal agreed, and awarded the payout to ECC on Friday, according to a copy of the ruling seen by AFP.
The penalty punished Nestle, as well as its capsule coffee arm Nespresso and its Nespresso France division, who were also hit with combined legal costs of 40,000 euros ($54,500).
Founded by a former Nespresso executive, Jean-Paul Gaillard, ECC produces biodegradable capsules which are almost a third cheaper than the original.
"I'm pleased with this decision, which demonstrates that the justice system works well," Mr Gaillard told AFP.
The complaints were directed specifically against Nestle's Club Nespresso network, which enables clients to order capsules and coffee machines, as well as marketing Nespresso-branded goods.
Nespresso, which deploys Hollywood stars George Clooney and Matt Damon in its advertisements, is one of Nestle's flagship brands.
The Swiss group cornered the lion's share of the coffee capsule market with its high-margin product, but has seen its business dented over recent years by the emergence of competitors who make their own machines and capsules, or offer Nespresso-machine compatible products.
Contacted by AFP, Nespresso said it was "disappointed" by the court ruling, which it was still examining, and that it planned to appeal.