Attorney Questions Gates On Conduct Toward Apple, Others

Microsoft

In his second day of testimony, Gates both evaded questions and at times acknowledged the concerns of some states about Microsoft's conduct. The states maintain Microsoft has, in the past, degraded and broken competitors' applications, and said they want to prevent future occurrences of the same behavior. Nine states are fighting for tougher curbs on Microsoft's business practices than those agreed on by the company and the U.S. Department of Justice.

Gates did not answer when states' attorney Steven Kuney asked if he recalled an instance in which Microsoft deliberately changed software code without good cause to affect a competitor's position. The states want written into any settlement a prohibition of such retaliatory conduct.

Under questioning, Gates acknowledged that Microsoft's strong-arm stance when Apple supported Netscape's browser over Microsoft's Internet Explorer might be considered inappropriate under the states' remedies. Most observers agree that the availability of Office for Apple's Macintosh is crucial to Apple.

Kuney also zeroed in on Microsoft's refusal to let hardware OEMs sell older versions of Windows at a discount and pass those savings on to customers.

Gates maintained that it is in the industry's best interest for users to keep current with technology. "Obsolete versions of Windows are a drag on the ecosystem. The consumer is [not better off. It makes perfect economic sense to encourage people to use [Windows XP because it's a better operating system," Gates said.

Gates maintained that the states' proposed remedies are too vague and too open to legal interpretation. "Whoever wrote this wanted it to be extremely broad," Gates said. The general nature of the proposed remedies puts Microsoft in a precarious position because every business decision could be scrutinized and interpreted by lawyers, he said.

One pro-Microsoft observer credited Gates with being precise and helpful. "His testimony has been soaked with real-world examples, [and it shows he understands the ramifications of how the states [want to affect his business," said E. Andre Carter, CEO of Irimi, a Washington-based mobile and wireless consultancy, who also works for the pro-Microsoft lobbying group Americans for Technology Leadership.

"He's guarding Microsoft's [intellectual property zealously," said Carter. If Microsoft gives too much, it opens the door to too much litigation down the road, he added.

Another industry observer who requested anonymity said Gates' and Microsoft's characterization of what will happen to the company and the industry if the states get their way is grossly exaggerated. Gates has repeatedly said the states' moves will not only cripple Microsoft, but maim the PC industry in general.

"We expected this Armageddon defense and it's nonsense," the observer said.