Microsoft chief takes stand in antitrust case

It's Gates first appearance in 4-year-old federal suit

He blasts proposed remedies

His firm says penalties may force halt to Windows

April 23, 2002|By BOSTON GLOBE

WASHINGTON - Four years into the antitrust suit against Microsoft Corp., the company's legendary co-founder, Bill Gates, finally had his day in court yesterday.

In more than four hours of testimony and cross-examination, a cool and assertive Gates insisted that a set of remedies proposed by nine states and the District of Columbia would devastate not only Microsoft but the entire computer industry.

In 163 pages of written testimony, Gates said the proposed settlement would cause "great damage to Microsoft, other companies that build upon Microsoft's products, and the businesses and consumers that use PC software."

Gates stood by his position throughout a detailed cross-examination by Steven R. Kuney, one of the attorneys representing the states. The cross-examination will resume this morning.

Neither Gates nor Microsoft is on trial here. Indeed, the verdict is already in. A federal appeals court upheld a lower-court ruling last year that the software company had violated the Sherman Antitrust Act. But the appeals court threw out a proposal to restore competition by breaking Microsoft into two companies, and appointed a new judge, Colleen Kollar-Kotelly, to assess new penalties.

The antitrust case was originally filed by the Justice Department, which was joined by 20 states, although two dropped out.

Last year, the Justice Department and nine of the remaining states, including Maryland, reached a settlement with Microsoft, pending court approval. But nine other states and the District of Columbia rejected the deal, saying it left Microsoft free to continue its anti-competitive practices.

Instead, the "non-settling states" have set out a series of demands that Microsoft says are so onerous that the company would have to cease selling its Windows operating system software.

For instance, the states want Microsoft to offer versions of Windows that allow computer makers to leave out features of the software before installing it on their machines.

These features include the Internet browser, digital music player, and instant messaging software, among others. Microsoft says this "unbundling" of key Windows features would make it impossible for the company to maintain the quality of the product.

The states also want to compel Microsoft to provide vast amounts of information about the inner workings of Windows. Microsoft argues that this amounts to a giveaway of intellectual property worth billions of dollars, and would enable rivals to steal Microsoft's code and create imitation versions of Windows.

Kuney sought to show that Gates' warnings of doom were exaggerated, but a relaxed, well-prepared Gates stood his ground, calling one provision of the states' proposal "a dream come true for somebody who wants to clone Windows."

When Kuney offered a different interpretation of the clause, Gates replied: "I don't mean to be disrespectful, but I don't believe such people have read the thing carefully."

In another exchange, Gates said the proposed settlement would force Microsoft to reveal to competitors secret encryption data the company uses to add security features to Microsoft products. This would make it impossible for Microsoft to ensure the security of its products, because the secret encryption keys would have been compromised.

"You don't think it would be reasonable for Microsoft to withhold cryptographic information when people come to read the source code?" said a skeptical Kuney. "No," replied Gates, insisting that the letter of the agreement would require him to give up the secret data.

Gates also claimed that, under the states' settlement, a Microsoft employee would be in contempt of court if he merely thought about adding a new feature to Windows without revealing his thoughts to Microsoft's competitors.

Such arguments raised the ire of former Whitewater independent counsel Kenneth W. Starr, who is employed by the anti-Microsoft lobbying group ProComp. "That is an unnecessarily extreme and wooden reading of the state's remedies," Starr said.

During the first phase of the antitrust case, Gates did not testify in person, instead submitting to a videotaped deposition that even Microsoft supporters viewed as a disaster.

In the video, Gates came across as uncooperative, surly and deceitful. He frequently rocked back and forth in his chair, as if he were nervous and uneasy during questioning.

He gave such a bad impression that the prosecution relished playing excerpts of the videotape at every opportunity, and called the videotape their strongest weapon.

This time, Gates sat erect and alert, occasionally smiling. His answers generally were quick and direct, though sometimes complicated with technical explanations and arguments over the precise meanings of terms.

He also engaged in banter with his legal team during the occasional recess.

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