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. 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.
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 — 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 courtroom.
Gates explained that the cost of Windows ME and Windows XP is the same to OEMs, so Microsoft doesn’t profit when PC vendors chose to bundle 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.
The states’ lawyer then 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.
The cross-examination of Gates will continue Tuesday morning.