Gates: States' remedy an industry setback

WASHINGTON--Microsoft Chairman Bill Gates told a crowded courtroom Monday that a proposed antitrust remedy would fragment the Windows operating system, creating a chaos of incompatibilities and turning back the clock on the software industry.

Testifying in person for the first time during the nearly 4-year-old antitrust case against the software giant, Gates argued that the remedy's provision on code removal would split Windows into many different versions. The remedy, proposed by nine states and the District of Columbia, calls for Microsoft to ship a version of Windows with so-called middleware, such as browsing software, stripped out.

"Under the states' proposal," Gates said, "Windows would no longer be uniform. Anyone who licensed 10,000 copies would...be able to make arbitrary changes" to the operating system.

Using a hypothetical example of separate Windows versions from AOL Time Warner, Sun Microsystems and Gateway, Gates said such versions would lead to a situation where "some of the applications don't run on some of the variations. You wouldn't know which fragmented version (an application) would be compatible with."

He added that such a rupturing of Windows would upset the financial situation in the software industry.

"This changes the economics," Gates said of software developers having to create programs for multiple versions of Windows. He said the economics of the software industry and its development costs mandate selling products in high volume to keep consumer prices affordable. "As soon as you fragment," he said, "it makes it so lots of applications are no longer economical."

The result, Gates said, would turn back the clock on the software industry to before the dawn of the personal computer.

The proceedings before U.S. District Judge Colleen Kollar-Kotelly, to determine a remedy for Microsoft's antitrust violations, entered their sixth week Monday. They are part of a continuing effort by nine states and the District of Columbia to bring harsher terms against Microsoft than those reached by the Justice Department and nine other states in a settlement proposed in November.

Smart maneuver
Gates is the eighth witness to take the stand for Microsoft. Like other witnesses, he had submitted written testimony to the court before being cross-examined by an attorney for the states. For the most part, questioning must be restricted to the contents of the written testimony, which carries the same weight as that given in court.

In his written testimony, Gates emphasized: "Microsoft is committed to complying fully with Court orders, including any remedy that might be ordered in this case. We can do that only if the remedy is clear as written and its terms feasible."

Gates took the witness stand around 9:25 a.m. PDT. In a smart legal maneuver, Microsoft attorney Dan Webb burned off most of the 35 minutes before the lunch break by reviewing exhibits supporting Gates' written testimony. This delayed Steven Kuney, an attorney for the states, from immediately beginning his cross-examination and allowed Gates to broadly review the main themes of his written testimony for the judge.

Noticeably absent from the courtroom was Brendan Sullivan, the high-powered attorney the states hired to lead the case. Many legal experts had been expecting Sullivan, who has been largely silent in court since his opening statement, to cross-examine Gates.

During cross-examination, Kuney probed Gates at length about whether Microsoft had attempted to remedy the antitrust violations upheld by an appeals court in June 2001. He asked if Microsoft is still engaged in the kind of activities ruled illegal by the court.

"I don't believe they are," Gates responded. "If I thought they were, I would stop that."

Kuney also asked Gates to explain the philosophical approach he took to his written testimony.

Gates spent most of his written testimony going specifically through the states' remedy proposal and explained why it doesn't make sense, how it would hurt Microsoft, and the ways it would cripple the software industry. Kuney asked Gates whether he understood that one purpose of the remedy is to restore the competition that existed before Microsoft committed its illegal acts, many of which occurred during the mid-1990s.

"In my testimony there is not a specific proposal about what a remedy should be," Gates responded. "I wasn't proposing a remedy."

The morning session wrapped up with Kuney probing the extent to which Gates believed the states' remedy would hurt Microsoft. He asked Gates if he believed that the proposal would lead to the disintegration of the company.

"Yes," Gates responded.

Gates is expected to be on the stand for the rest of Monday, continuing through Tuesday and possibly into Wednesday.