Gates testimony continues, tempers flare

Microsoft Corp. chairman and chief software architect Bill Gates sparred with an attorney representing the states suing Microsoft over his interpretation of the states’ proposed antitrust remedies, as he began his second day of testimony at the Microsoft remedy hearing Tuesday morning.

While remaining generally agreeable, Gates occasionally showed frustration with the pointed questioning from attorney for the states Steven Kuney. Gates would speak quickly and emphatically as his frustration mounted, peppering his speech with occasional nervous laughter, while Kuney would slow down his speech to add emphasis to his points.

Kuney’s cross-examination, continued from Monday afternoon, attempted to show that Gates is overreacting to the states’ proposed remedies. Later in the afternoon, the lawyer also tried to show that the states’ remedies are needed to prevent Microsoft from engaging in anticompetitive behavior in the future. This hearing before U.S. District Judge Colleen Kollar-Kotelly is for Microsoft and the nine states plus the District of Columbia that did not agree to a settlement to present remedy proposals to Microsoft’s anticompetitive behavior. Last November, the U.S. Department of Justice (DOJ) and nine other states reached a proposed settlement with Microsoft; the holdout states are seeking stricter and broader remedies on the company’s behavior.

In his written direct testimony, Gates said that the states’ proposal would tie Microsoft’s hands from making any changes to Windows, since those changes could adversely affect other software makers’ products. Kuney asked if Microsoft has ever made changes to Windows for the sole purpose of degrading the performance of another company’s product, to which Gates answered no.

The states’ remedy specifies that the provision would only affect changes to the Windows product that were not made for good reason, Kuney pointed out through questioning. Therefore, Kuney asked, if Microsoft only modified Windows for good cause, the remedy should have no affect on the company’s behavior.

Gates disagreed, saying that Microsoft would be victim to different interpretations of good cause. Microsoft would be restricted from making changes to Windows by the fear that a third-party software company would create some controversy over a change that affected their software, and that could put Microsoft in contempt of the remedy, he said.

Kuney asked if Gates was concerned third-party software companies would bring meritless claims against Microsoft. “They would bring claims on which reasonable men would disagree,” Gates responded.

The cross-examination moved to the states’ proposed remedy that would require Microsoft to continue licensing older versions of platform software, which Gates said in his written direct testimony would contribute to the fragmentation of Windows. Another states’ remedy would force Microsoft to sell an “unbound” version of Windows — one stripped of additional software such as a browser and media player referred to as middleware — that Gates said in his testimony would also create fragmentation of the OS.

Kuney asked whether there are multiple versions of Windows in the market now, to which Gates answered yes. The lawyer asked if Microsoft took steps to clear up any confusion the different versions of Windows create; Gates answered that Microsoft does take steps to clear confusion through its marketing efforts.

Again Kuney asked how the states’ provision would change the company’s current behavior, if the Windows market is already fragmented. Gates answered that Microsoft would be forced to continue licensing older versions of Windows it normally takes off the market once service packs that contain fixes are released, therefore adding to consumer confusion. Microsoft also pulls older software that is found in violation of other companies’ software, Gates said, as it has done with MS-DOS.

Kuney pointed out through questioning that the subject heading in the states’ remedy on that point refers to an earlier version of the OS, not versions.

“One thing you should never think is that in the states’ (proposal) the heading properly describes what’s in the paragraph after it,” he responded, drawing laughter from the court room.

Gates explained that the cost of Windows ME and Windows XP is the same to computer makers, so Microsoft doesn’t profit when PC vendors choose to bundle the recently released XP with their machines. “The consumer is just net better off with the newer version … it’s the same price and a better product,” he said.

In his written direct testimony, Gates claimed that the states’ provision to make Microsoft sell an unbound version of Windows would not only fragment the OS, but would force the company to pull the product from the market. This is because it would be impossible for Microsoft to satisfy the provision that says the unbound version must be functionally equivalent to the version of Windows that includes middleware.

Kuney asked if Microsoft would attempt to comply to the remedy before pulling Windows from the market. “Given the way (the provision) is written, I don’t see how we could comply,” Gates responded. Kuney asked if Microsoft would try. “We’d be in an awful situation where we’d be under court order whereby we couldn’t comply except to withdraw Windows from the marketplace,” the chairman answered.

If the states’ remedies were imposed, Microsoft would “come back to every court that would listen to us. We’d certainly make every effort on the legal front,” he said. Kuney asked about the engineering front, to which Gates answered he didn’t think it was possible.

Later, Kuney asked if Gates had misinterpreted the obligations imposed by the states’ remedy regarding unbound Windows. Gates answered no. The attorney showed the court a segment of Gates’ written direct testimony where the chairman shot down four proposals by states’ expert witness Andrew Appel, a professor of computer science at Princeton University, who testified earlier in April. Appel made suggestions for how Microsoft could create an unbound version of Windows that functions as the version of Windows with middleware.

Each of Appel’s suggestions was either unfeasible or would not satisfy the requirements of the states’ remedy, Gates said.

The states’ lawyer asked about Gates’ assertion in his written testimony that Microsoft’s ability to compete would be limited by a proposed states’ remedy that calls for preventing Microsoft from taking adverse action on a company that chose not to license its software. Gates offered an example as his answer: if Compaq Computer Corp. chose to license Microsoft’s PocketPC operating system for handheld devices but Sony Corp. chose to license competing software from Palm Inc., Microsoft would be in violation of the decree for not giving Sony the same access to information — such as future product plans and marketing support — that it gave Compaq.

Tuesday afternoon, Kuney attempted to show that the states’ remedies would be the only safeguard to keep Microsoft from repeating past behavior.

Kuney asked Gates if, besides the states’ remedy that would prevent Microsoft from retaliation, would there be any other impediment to Microsoft acting the same way again. The lawyer gave examples of Microsoft’s previous retaliatory behavior that were brought up during the liability portion of the antitrust trial, including Gates’ insinuation that Microsoft would pull Office for the Macintosh because Apple Computer Inc. contemplated using a competing browser.

Gates asked if Kuney was referring to restrictions in the proposed settlement Microsoft reached with the DOJ and nine other states, to which Kuney responded he wasn’t referring to anything in particular. “I’m trying to find out if you see any other obstacles?” Kuney asked. Gates answered he did believe the proposed settlement would limit such behavior.

Earlier in the hearing, at least one witness for the states testified in favor of the states’ remedies because they provide for protection against retaliation from Microsoft, and the proposed settlement does not.

Responding to questioning, Gates also told the court that it would take hundreds of engineers working for years to produce the reference implementations of the Windows’ programming interfaces that the states’ proposed remedies call for. “Given the scope of the interfaces (the states’ remedies) require us to disclose, it would be a massive effort,” he said.

The states’ cross-examination of Gates will continue Wednesday.