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Microsoft to call Apple on the mat

When the antitrust trial resumes, Microsoft is expected to grill Apple Computer about the PC maker's efforts to settle a patent dispute with the software giant.

WASHINGTON--When the landmark antitrust trial under way here resumes tomorrow, Microsoft is expected to grill Apple Computer about the PC maker's efforts to settle a patent dispute with the software giant.

Microsoft is expected to introduce two letters in which Apple allegedly demanded windfall sums of cash and other concessions in order to settle the dispute, which centered around patents Apple asserted against Windows technology.

In one letter, sent on March 17, 1997, Microsoft says, Apple demanded $1.2 billion in order to settle the dispute. In a second letter sent on April 7, 1997, Microsoft's day in court executive vice president of operations George Scalise and executive vice president for technology Ellen Hancock sought further concessions from Microsoft "relative to establishing an ongoing and long-term business relationship between Apple and Microsoft and resolving the patent issues between our two companies."

Microsoft says this included support for Apple's Rhapsody operating system, which was in development at the time, as well as for developer tools used to "port" or translate Windows applications to the Macintosh. Apple also asked Microsoft to provide games and other content for the Mac, in addition to "hundreds of millions of dollars" in cash. The evidence will attempt to show that Apple was not as put-upon by Microsoft as it now claims.

An Apple spokeswoman declined to comment on the matter.

Meanwhile, trying to bolster allegations made by a senior Apple executive, the government yesterday showed videotaped testimony of Microsoft chief executive Bill Gates contradicting his own internal emails.

The deposition--in which a sometimes combative Gates claims he cannot recall key business events--is designed to reinforce explosive allegations made by Apple senior vice president Avadis Tevanian, who has accused the software giant of using strong-arm tactics to compete against rivals. Under oath, Gates denied using the popular Microsoft Office program as a way of pressuring Apple to support Microsoft strategies, even as Microsoft email seemed to indicate otherwise.

In the ninth day of trial, Justice Department (DOJ) lead prosecutor David Boies contrasted Gates denying any knowledge of crucial events--key among them negotiations between Microsoft and Apple--with emails that seemed to suggest otherwise.

"The threat to cancel Mac Office 97 is certainly the strongest bargaining point we have, as doing so will do a great deal of harm to Apple immediately," Microsoft manager Ben Waldman wrote in a June 27, 1997, email to Gates and other executives. "I also believe that Apple is taking this threat pretty seriously."

Four days earlier, Gates had sent an email to Bradford and others seeking ways "we can get them to embrace Internet explorer in some way."

Gates, who said he had no recollection of receiving the email, insisted there had never been a plan to leverage Office.

"Did someone tell you in or about June of 1997 that Apple was taking Microsoft's threat to cancel Mac Office 97 seriously or pretty seriously?" Boies asked.

Gates, who was seated in a leather chair with a tall backrest, replied that Paul Maritz, the vice president in charge of Microsoft products, had argued internally that the project wasn't worth the expense. "It's very possible Apple might have heard about Maritz's opinion there and therefore been worried," Gates said.

Boies rephrased the question three more times, clarifying that he was not interested in Maritz's position or what Apple may have known.

Gates again repeated his answer about Maritz's view being worrisome to Apple. "But I...don't remember...it being phrased at all the way you're phrasing it," Gates said.

"Well, the way I'm phrasing it is the way that Mr. Waldman phrased it to you in his email of June, 27, 1997," Boies shot back. "Correct, sir?"

"Well, in reading it, I see those words, yes," Gates answered, looking at a copy of the email in front of him.

The exhibits are designed not only to cast doubt on Gates's credibility, but to bolster Tevanian's claim that Microsoft used its software dominance to pressure Apple into endorsing Microsoft's Internet Explorer and to steer clear of technologies that were at odds with Microsoft strategy. Microsoft strongly denies Tevanian's account.

In some portions of the videotape, Gates's hair is disheveled, and he frequently sips from a soft drink can. See CNET Radio: 
Our Man in Washington He often cannot remember receiving email messages addressed to him, and at one point claims he does not know if his company's deal with Apple required the computer maker to carry Internet Explorer.

Outside court after trial recessed for the day, Joe diGenova, a former federal prosecutor now working for Microsoft, downplayed the effect of the video.

"If the government was looking for a knock-out punch, it certainly was not provided in today's deposition," said diGenova. He added that it was an "ordinary deposition of an extraordinary man."

Microsoft also pointed out that Gates testified that his main reason for negotiating with Apple was "to conclude a patent cross-license of some kind."

In an attempt to discredit Apple, Microsoft is expected to return to the patent issue in cross-examining Tevanian Wednesday. Microsoft is expected to use Apple's letters--which allegedly also demand that Microsoft change development dates for various products--to show that it was Apple that applied pressure. The software giant is likely to point to an agreement signed in the summer of 1996 that guaranteed Apple Microsoft Office would be marketed for the Mac for five years.

In 45 pages of written testimony, released Friday, Tevanian accuses Microsoft of proposing that the two companies divide the emerging market for multimedia software. After Apple refused to go along, Microsoft allegedly set out to "sabotage" Apple's popular QuickTime multimedia player by placing "misleading error messages" in Windows and by warning third parties such as Compaq Computer not to license the product.

Tevanian's testimony also claimed that the software giant threatened to discontinue Office for Macintosh if Apple did not make Microsoft's Internet Explorer the default browser and settle a pending patent dispute. During the negotiations in 1996, Apple's market share was rapidly eroding. The Cupertino, California-based computer company worried the pulling of the popular product would only make matters worse.

Gates's testimony also brought to light alleged attempts to force Apple to harm Sun Microsystems, whose Java programming language theoretically posed a threat to Microsoft's Windows franchise.

"I want to get as much mileage as possible out of our browser and Java relationship here," Gates wrote in an August 8, 1997, email to Maritz and another Microsoft manager. "Do we have a clear plan on what we want Apple to do to undermine Sun?"

Tevanian is likely to be the only witness on the stand during this shorter-than-usual week. Court will not be in session tomorrow so that participants will have an opportunity to vote in political elections being held nationwide. A week from today, the government said it would call Intel vice president of content Steven McGeady to the stand.