April 22, 2002 9:25 AM PDT
Gates says states' remedy "impossible"
In the 156 pages of written testimony submitted before his appearance on the witness stand, Gates said the remedy proposed by nine litigating states and the District of Columbia is unworkable and would damage Microsoft and the computing industry. He said stability, consistency and quality of Windows, the ability to run the operating system across a vast array of hardware, and the assurance of intellectual property protection are essential to Microsoft's business.
"It would be extremely difficult, if not impossible in some cases for Microsoft to comply with" the states' remedy, Gates argued. He said that many of the proposals would "lead to extreme results" and that vague and ambiguous definitions provide "Microsoft with no clear statement of its obligations." He warned that the states' remedy provisions on so-called middleware "would effectively turn back the clock on Windows development by about 10 years and effectively freeze it there."
The proceedings, to determine a remedy for Microsoft's antitrust violations, entered their sixth week on Monday. Gates is the eighth witness to take the stand for Microsoft.
Like other witnesses, Gates submitted written testimony to the court before being cross-examined by an attorney for the states. For the most part, questioning must be restricted to the contents of the written testimony, which carries the same weight as that given in court.
Gates emphasized: "Microsoft is committed to complying fully with Court orders, including any remedy that might be ordered in this case. We can do that only if the remedy is clear as written and its terms feasible."
Legal experts said the software maker is putting huge weight on Gates' testimony. "Microsoft is using the prepared written testimony of Mr. Gates to document the vast majority of its case against the states' remedies," said Rich Gray, a Menlo Park, Calif.-based lawyer closely following the antitrust trial. "In fact, it's more or less a road map for the judge to follow."
Gray highlighted what he said were the overriding themes in Gates' submitted testimony: "The states' remedies would do more harm than good because of the fragmentation of Windows and confusion (it) will cause in the computer industry; the states' remedies are a particularly onerous punishment of Microsoft; (and) even if you accept that some of the goals the states are trying to achieve in the remedies are appropriate, the details of their proposal have many serious flaws."
Before Gates took the witness stand, the states concluded their cross-examination of David Cole, senior vice president of the MSN and Personal Services groups. Cole, the first Microsoft executive to appear on the company's behalf during this portion of the antitrust case, took the stand late Thursday.
Microsoft brought out Cole to rebut accusations made by the states' witnesses John Borthwick of AOL Time Warner and Sun Microsystems Chief Technology Officer Jonathan Schwartz and to explain the role of Microsoft's Passport authentication service. Those witnesses had argued that Microsoft is using Windows XP to compel people to sign up for Passport accounts.
During cross-examination, John Schmidtlein, an attorney for the states, introduced an e-mail about Passport from Microsoft employee Jim Cullinan to Jim Allchin, group vice president of Microsoft's platform group, and other executives. Cullinan wrote that "feedback was mixed" from the media about Passport's sign-up prompts in Windows XP.
"Most press saw that as trying to force Passport down someone's throat," Cullinan wrote.
Later, Schmidtlein introduced an internal document outlining Microsoft's consumer Web services strategy. That document in part described Microsoft's goal as being to create "the largest and most extensive database of profiles on the planet."
Schmidtlein unsuccessfully attempted to get Cole to admit that Passport would be necessary for collecting that data.
In a startling admission, Cole said Microsoft in June 2001--three months after launching .Net My Services--had no idea how to deliver those consumer Web services to Passport users and other people.
"There was nobody who knew how that was going to work or how that was possibly going to work," he said.
The "PC ecosystem"
Gates did not testify during the main trial, but government lead attorney David Boies effectively impugned the Microsoft co-founder's credibility by showing select snippets of a videotaped deposition. Those portions of the tape made Gates appear either ill-informed or evasive during questioning. Many legal experts questioned the soundness of Gates not testifying in defense of his company during the main, or liability, phase of the case.
U.S. District Judge Thomas Penfield Jackson presided over that phase of the trial, later ruling that Microsoft had violated two sections of the 1890 Sherman Antitrust Act and ordering the computing giant to be broken into separate operating systems and software applications companies.
A federal appeals court, which in June 2001 upheld the core of the antitrust ruling, threw out the remedy for technical reasons and removed Jackson because of statements he made outside the courtroom to the press. The case later was randomly assigned to U.S. District Judge Colleen Kollar-Kotelly. In part, Gates' written testimony could be viewed as a way of educating Kollar-Kotelly while giving her Microsoft's perspective on the states' remedy proposal.
In his written testimony, Gates recounted the dawn of the personal computing industry as seen from the perspective of Microsoft, which he co-founded more than 25 years ago with Paul Allen. "Since that small beginning, Microsoft has invested more than $6 billion in developing its operating system products--and billions more creating development tools and applications that enhance the value of the platform," Gates wrote.
The Microsoft chairman described Windows stability for hardware and software developers as essential for maintaining the health of what he called the "PC ecosystem." Microsoft's success, Gates said, is in large part due to the licensing of Windows to PC makers and its ability to run off different kinds of hardware. He noted that competitors like Apple Computer and Sun "have chosen alternative business and technology strategies, often focused more in selling relatively expensive hardware than on facilitating broad interoperability."
Gates then went on to explain where the company is going next, in part with its .Net software-as-a-service strategy.
"Today, Microsoft is investing in a next-generation computing platform, XML Web services, that holds the potential to unleash new waves of productivity gains in the economy," Gates testified. He explained how those services are independent of the operating system software. "That is the beauty of XML Web services--they enable access to data and functionality anytime, on any device, running any software."
Gates testified that the litigating states' proposed remedy would harm Microsoft's business in three ways: It would jeopardize development of future versions of Windows; hamper the company's efforts to promote hardware and software products that work well together; and imperil the "central role" played in protecting intellectual property.
Windows stability is essential for ensuring that software developers have access to a stable set of APIs (application programming interfaces) to which to write programs, he explained. Gates estimated that Windows makes available to developers about 6,000 APIs.
He went on to describe the similar value of Microsoft's Component Object Model, or COM. "I believe that Microsoft discloses more technical information about its products than any other software company," he testified.
The states' remedy "would undermine the utility of Windows as a development platform by requiring Microsoft to enable anyone who offers to license 10,000 copies to remove blocks of software code from Windows before providing it to consumers," Gates testified.
One of the states' remedy provisions would compel Microsoft to sell a version of Windows with the so-called middleware, such as Web browsing and media playback, stripped out.
"If software code is removed, the Windows APIs provided by that code will no longer function," Gates testified. If PC makers "and others remove software code from Windows as the (states' remedy) would authorize them to do, then Windows would fragment."
That fragmentation would lead to chaos for software developers and consumers, Gates argued. "If the Windows platform were to fragment, the primary value it provides--the ability to provide compatibility across a wide range of software and hardware--would be lost," he said. He noted that Windows quality would no longer be assured.
Complying with Section 1 of the remedy proposal, middleware provision, would "require Microsoft to withdraw Windows from the marketplace," Gates testified. "I know that Microsoft could not have developed Windows 95...if Section 1 had been in effect in the early 1990s."
Microsoft's chairman also directly addressed Princeton professor Andrew Appel, a witness for the states, who contended that Windows XP Embedded proves that the software giant can effectively remove middleware from Windows. XP Embedded is a modular version of Windows designed for non-PC devices.
Gates also argued that complying with Section 1 is an impossible task from an engineering perspective. Removing 10 components, for example, would mean that Microsoft would have to develop an operating system that could be deconstructed into 1,024 combinations.
Looking at four products--Windows 95, Me, 2000 and XP--developed on two code bases, "we would face the immediate prospect of attempting to re-engineer our products to ensure that any of 4,096 combinations of operating system software would comply with Section 1," Gates testified.
Microsoft's chairman also explained how the states' broad definition of middleware would stifle development of future Windows versions and constrain the software giant's ability to innovate. This is because "any new feature that Microsoft might contemplate providing in a new version of Windows would likely be regarded as middleware."
Gray, the California lawyer following the trial, said that it is appropriate for Microsoft to point out the problems with the states' handling of middleware, but that their solution does not mean some stiffer remedy in this area isn't warranted.
"If the judge decides it's appropriate to open up the market for middleware as requested by the states, she will find a way to do it," he said. "It may not be exactly what the states propose."
Gates also warned that the states' remedy would "strip" Microsoft of valuable intellectual property. "Unlike patent and copyright rights, which survive disclosure, trade secrets are forever lost once revealed," he testified. "Without intellectual property protection, there would be no reason to invest in developing software."
Unlike in the settlement cut between Microsoft, the Justice Department and nine other states, the litigating states have targeted the company's code. They want Microsoft to give away for free the source code to the Internet Explorer browser, license through auction the Office business application suite for development on competing operating systems, and further extend API disclosure.
Gray said that of all the code-opening provisions--even the stripped-down version of Windows--the auctioning of Office is the most significant.
"That is the most dramatic remedy the states are seeking," he said. "The very fundamental question is, should you be doing it? And that comes back to what Judge Jackson found and the Court of Appeals affirmed, which is Microsoft illegally protected its Windows monopoly." One way, he said, is using the popularity of Office to shield Windows.
Of all the remedies the states are seeking, "this one is most directly designed to undercut the Windows monopoly and the one most directly relevant to the antitrust violation Microsoft was found to have committed," Gray said. "It would, however, be a breathtaking victory for the judge to give them anything like the remedy they are asking for."