Alexander Ponosov, the principal of a school in a small town in the Ural Mountains region of Perm, could have faced a prison term of up to five years and 266,000 rubles ($10,110) in damages if convicted.
The man was charged with copyright violation last year after he bought a set of computers for his school containing unlicensed Microsoft software. He maintained his innocence throughout the proceedings, saying he was unaware that the Windows software on the PCs was counterfeit.
The presiding judge, Vera Barakina, said the case had been dropped for lack of evidence.
But the prosecution protested the decision as formally incorrect, and said the judge should have delivered a guilty or not guilty verdict.
"I consider the court's decision unlawful on formal grounds," prosecutor Alexander Troyanov said, adding that he and his colleagues may appeal within 10 days.
Commenting on the case ahead of Thursday's court session, Microsoft Russia Chairwoman Olga Dergunova said the corporation had not filed any lawsuit against the Russian teacher, reaffirming an earlier statement issued in response to a plea from Mikhail Gorbachev.
The former Soviet leader asked Microsoft Chairman Bill Gates in early February to intervene in the proceedings, which the Nobel Prize laureate described as a "show trial." The company then said it had not done anything to instigate the prosecution of Ponosov.
"Generally speaking, we do not believe that a case of this kind warrants criminal prosecution, given the very small number of computers involved and the fact that the computers were purchased for use by students," Dergunova said.
Russia, the largest market for pirated material after China, has long been facing international pressure to crack down on the trade.
The issue was a major stumbling block in Russia's World Trade Organization accession talks with the United States. The sides eventually signed a final agreement last November after Moscow promised to get tough on intellectual property violations.
However, Ponosov's trial proved quite controversial both at home and abroad, with many observers criticizing the software giant for attacking the small-town schoolteacher as an easy target and accusing Russian prosecutors of using the test case to show off their efforts in combating piracy.
At a recent press conference, President Vladimir Putin called the Ponosov case petty and meaningless, and said it is the makers and distributors of counterfeit products who should primarily be called to account, not the end users.