The federal court ruled against the Australian band after Larrikin music publishers claimed that the flute solo in the disputed song illegally sampled parts of a track that it owns, according to MSN.
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As a result of the ruling, band members Colin Hay and Ron Strykert and the group's record label, EMI, will have to give up five percent of the song's earnings dating back to 2002 and must continue to pay Larrikin the same cut of all future royalties.
While Men at Work lost the court battle, they escaped relatively unscathed, as the judge could have ordered that they forfeit 60 percent of the song.
Men at Work's "Down Under" topped the charts in the US in 1982, making the group the first and only Australian musical act to have a number one hit and number one album at the same time in America.