Gates Tries Softer Voice In a Loud Court Battle

"Cloning is a strategy that Microsoft has employed, isn't it?" Kuney asked.

"We have done it," Gates responded, adding that he believes cloning is appropriate if a company does it without improperly obtaining another firm's source code.

Kuney also challenged Gates to explain a 1988 e-mail in which he exhorts his top executives to stop allowing Microsoft's Office suite of programs to work well with non-Microsoft browsers.

"Allowing Office documents to be rendered very well by other people's browsers is one of the most destructive things we could do to the company," Gates wrote. "This is a case where Office has to avoid doing something to destroy Windows."

Gates responded that Microsoft's software development resources are finite and that choices have to be made between working on helping non-Microsoft programs work with Windows and developing and improving the company's own programs.

Although he attacked every substantive portion of the states' remedies except how they would be enforced, Gates focused particular ire on the provision that would require the company to produce a version of Windows that does not include Microsoft applications for such activities as Web browsing, playing digital music and videos, and instant messaging.

The states want to level the playing field for rival software companies by allowing computer makers to configure machines with different software packages that run on Windows. Rather than enjoying automatic distribution of its software with Windows, which has a virtual monopoly in the market for computer operating systems, Microsoft would have to compete for such distribution.

Under the states' proposal, Microsoft could still offer a fully bundled version of Windows that computer makers could choose.

The states' argument relies in part on a federal appeals court ruling last summer that determined that Microsoft illegally bundled the code for its Web browser, Internet Explorer, into Windows. In this way, the court found, Microsoft quashed the competing browser made by Netscape Communications, which threatened Microsoft's hegemony because it ultimately might have allowed consumers to substitute it for many functions carried out by Windows.

But Gates said the operating system is designed in such a way that separating the code of built-in programs is technically impossible without breaking Windows. And he said doing so would destroy the economic value of Windows.

"Given the interdependencies among parts of Windows, and the complexity of the product, there is no clear dividing line between where a particular block of [a program] ends and the operating system begins," he said in his written testimony.

Microsoft over time has bundled more and more programs into the operating system, which the company argues enhances Windows' performance and ease of use. As a result, many of the applications rely on each other to operate, Gates testified.

But he also argued that even if the applications could be separated from Windows, the result would be hundreds if not thousands of variations of Windows that would cause confusion among users.

Gates acknowledged that many variations of Windows exist in the marketplace today, owing to older versions that are still in use, some of which will not run more-current applications. But he told Kuney that Microsoft tries to make the versions as compatible as possible, which would be impossible if various vendors could configure software packages out of Microsoft's control.

In perhaps the most significant piece of testimony, Kuney and Gates sparred over whether Microsoft could identify the code for the browser and other programs that would need to be removed under the state proposals.

Gates said the provisions provide no such guidelines. But Kuney got Gates to admit that as a result of Microsoft's proposed settlement with the Justice Department, the company already is in the process of identifying the boundaries of where code for an application begins and the operating system ends.

If Microsoft can define code for the federal settlement, why not for the state proposal? Kuney asked.

"It doesn't give us enough information to comply," Gates insisted. "We get zero guidance."

Gates continues his testimony today.