Before the court decision, HP had reportedly tried to come to terms on a fee, offering 3.6 deutschmarks (£1.1; $1.6) for every burner sold in the past, and 12 deutschmarks for each future sale.
The Stuttgart district court ruled that Hewlett Packard would have to pay a fee on every CD burner it sells in Germany, arguing that the technology was being used to lift music off the internet in contravention of artists' copyright.
Crucially, the judgement was backdated, covering all the burners HP has sold over the last three years.
Under German law, manufacturers of recording equipment have been charged copyright fees for decades now, but this is the first time that the law has been applied to digital hardware.
The judgement will apply to other firms selling CD burners in Germany, and may have implications around Europe.
The court has yet to rule on the size of the fee.
Differences of opinion
Germany's powerful copyright lobby welcomed the judgement.
"This decision is a major step in securing and enforcing rights in the digital world," said Reinhold Kreile, head of GEMA, the German anti-piracy organisation that backed the lawsuit against HP.
"As soon as the information is available, we shall therefore charge Hewlett-Packard and all other manufacturers of CD writers with the statutory royalty."
Before the court decision, HP had reportedly tried to come to terms on a fee, offering 3.6 deutschmarks (£1.1; $1.6) for every burner sold in the past, and 12 deutschmarks for each future sale.
After losing its case, the firm argued that application of existing German copyright law to digital technology was inappropriate.
"The information age gives creators and copyright owners the possibility to determine for themselves the use and value of their works," said Hans-Jochen Lueckefett, managing director of HP Germany.
"This decision did not take that into account."
More than burners
The Stuttgart decision could have wider implications.
Many other European countries, including France and Italy, have laws in place to compensate copyright holders from fees charged on hardware.
So far, these have only been applied to manufacturers of basic recording and reproduction equipment such as video and cassette recorders.
But the Stuttgart case reflects the German government's decision last year to upgrade the law to include digital technology.
In theory, GEMA would like to claim copyright fees from manufacturers of computer printers, high-speed modems and even hard drives.