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The giant fires back

Microsoft fires back at government prosecutors, claiming they have used "misleading" evidence to accuse the software giant of anticompetitive acts.

WASHINGTON--Microsoft fired back at government prosecutors here today, claiming they have used "misleading" evidence to accuse the software giant of anticompetitive acts.

Testimony continues this afternoon when Netscape Communications president and chief executive Jim Barksdale is expected to take the stand.

Microsoft attorney John Warden focused on the government's attempts to blunt the credibility of the company's chairman and chief executive, Bill Gates. In an opening statement yesterday, a Justice Department (DOJ) attorney contrasted Gates's videotaped testimony in which he claimed that he was unaware of key facts in the case with internal documents in which he and other top executives appear to be intimately familiar with the matters.

"The government's case is long on rhetoric and short on substance. The effort to demonize Bill Gates in the opening statement is emblematic of this approach," Warden said, adding that the smear was "not a substitute for proof of anticompetitive conduct."

A partner at Sullivan & Cromwell, Microsoft's long-time outside law firm, Warden gave opening Microsoft's day in court remarks that lasted more than two hours. Barksdale was expected to take the stand following a lunch recess. In his opening remarks, Warden walked through the defense he intends to provide. It includes the following claims:

• Netscape has not been deprived of the means to distribute its Web browser, contrary to government allegations;

• The government has no evidence proving Microsoft ever proposed to split the Internet browser market with Netscape;

• The government's claim that Microsoft has illegally "tied" its Internet Explorer browser to its Windows 98 operating system is disputed by the indisputable fact that IE is an "integral" part of the platform;

• An argument that government claims of Microsoft using predatory acts in dealing with partners were based on email messages and other evidence that was used out of context;

• Microsoft does not possess a monopoly in operating systems or a likelihood of obtaining a monopoly for browsing software.

Warden used a number of internal Netscape documents to poke holes in key government allegations that center around steps Microsoft took to compete with Netscape, which Warden referred to as "ward of the government."

According to its own projections, Warden said, Netscape expects to distribute more than 100 million copies of its Web browser through a marketing campaign called "Netscape Everywhere," and to involve more than 11,000 participants in a browser distribution program expected to distribute between 150 million and 170 million copies of the browser.

Warden also raised now-familiar arguments that long before Microsoft became concerned about Netscape's overnight success, the software giant had intended to fold Internet functions into Windows OS. He also cited a letter a Netscape attorney sent to U.S. assistant attorney general Joel Klein, who heads the Justice Department's antitrust department, as proof that Internet Explorer is an integral part of Windows.

Netscape is "totally unable to provide examples of files that can or cannot be deleted [from Windows] without severely interfering with the operating system," the March 6, 1998, letter reads.

"We expect there to be no competent evidence that Windows 98 is anything other than a single, integrated product," Warden claimed.

Warden also disputed a key government claim made yesterday that Microsoft threatened to retaliate against chip giant Intel if it pursued technologies that threatened Microsoft monopolies. Referring to an email message sent by Gates that government prosecutor David Boies cited yesterday, Warden accused the government of selectively quoting the document because the entire contents "would destroy that assertion."

Specifically, Warden pointed to a section in which Gates worried that an Intel technology called NSP, or native signal processing, contained "specific incompatibilities" with Windows products, which drive the vast majority of Intel's chips. Without Microsoft's intercession, Warden argued, computer vendors, software developers, and computer users all would have suffered.

Warden also claimed that contracts signed with Internet service and content providers do not violate antitrust laws, as the government has argued. Microsoft signed promotional agreements with only 11 of 3,000 Internet service providers, Warden said, and that "each and every one" of them was free to distribute Netscape's Navigator browser to customers who requested it. The government has alleged that Microsoft promised ISPs valuable placement in Windows on the condition that they not do business with Netscape.

The government made similar allegations concerning contracts Microsoft signed with large content providers such as Walt Disney. Warden called the contracts "of very little commercial consequence" because content providers have been shown to be a relatively inconsequential channel for distributing browsers.

For the first time today, Microsoft--through Warden--disclosed that an exclusive deal with America Online is a short-term arrangement that it can terminate by January 1999. The AOL deal, which forbids the No. 1 online service from distributing or promoting Netscape's Navigator, has come under fire repeatedly by critics.

Warden disputed other criticisms surrounding the exclusive deal, claiming that AOL already had obtained placement on Windows before it signed on to the deal, a far cry from government allegations that Microsoft used its Windows monopoly as an incentive because it recognized that its browser technology was inferior to Netscape's.

Internet Explorer is written in "modular components" that easily could be integrated into AOL software, Warden said. By contrast, he called Navigator "spaghetti code that would have been difficult and time-consuming for AOL to customize."

Warden also said the government would fail to prove that Microsoft has engaged in exclusive contracts with computer sellers, whose businesses need Windows products to survive.

Warden poked holes in numerous other government allegations, claiming Microsoft has done nothing to harm Sun Microsystems' Java programming language and that government attempts to prove Microsoft has a monopoly in any market will fail.

In the government's opening statements yesterday, Justice Department special prosecutor Boies cautioned that Microsoft's denials of wrongdoing are not to be believed, contrasting evidence--which he claims proves Microsoft knowingly violated antitrust laws--with Gates's videotaped testimony denying knowledge of any illegal behavior.

One of the most explosive allegations Boies introduced yesterday was that Gates asked America Online executives to knock Microsoft rival Netscape Communications out of the browser market.

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