Gates Warns of the End of Innovation

WASHINGTON -- Microsoft Chairman Bill Gates strode into a federal courtroom here Monday to fend off tough antitrust punishment and rehabilitate his company's image.

The world's richest man took the witness stand for the first time in Microsoft's landmark antitrust case and warned that punishment sought by nine states suing his company would cripple Microsoft and hurt the entire computer industry.

Accompanied to court by his wife, Melinda French Gates, and a small security detail, the software mogul was by turns cheerful, confident and testy on the witness stand before a packed courtroom. The appearance of the brilliant but volatile Gates was considered a risky legal maneuver, but observers said it seemed to pay off.

Appearing as Microsoft's seventh witness, Gates, 46, sparred with state lawyer Steve Kuney, who tried to show that Gates exaggerated the potential impact of punishment being sought by the District of Columbia and nine states suing Microsoft for antitrust violations.

But Gates kept his composure through more than three hours of tough cross-examination. More important, presiding U.S. District Judge Colleen Kollar-Kotelly appeared to pay close attention to the software executive, taking frequent notes and turning to look directly at Gates while he testified.

Under cross-examination by Kuney, Gates said the states' proposed remedies would "mean the end of innovation and the elimination of most employees at Microsoft.''

Asked by Kuney if he understood the seriousness of the government's proposed sanctions on his company, Gates said he viewed the trial and its outcome "as a significant situation, certainly one that could have a significant impact on the company.'' He added that his company had ceased the anti-competitive conduct that his company was found guilty of two year ago.

Gates' courtroom appearance supplemented a 156-page written submission in which the company, under his name, assailed the proposed remedies as a straitjacket that would destroy the utility of Windows, undermine Microsoft's corporate viability, and stifle innovation across a broad spectrum of software development.

The states refused to sign on to a settlement between Microsoft and the Justice Department last fall. Among other penalties, the states want Microsoft to make public the millions of lines of "source code'' that powers Windows.

Such proposals, according to Gates, "would turn back the clock on Windows development by about 10 years and effectively freeze it there.'' Competitors, by contrast, would have the unfettered right "to add new cutting-edge features to their products.'' The "practical effect,'' Gates' statement said, "would be to cripple Microsoft as a technology company.''

Critics of the company said that much of the written testimony repeated arguments that Microsoft made unsuccessfully at earlier stages of the trial. "Microsoft's strategy is to relitigate the parts of the case they have already lost,'' said Roger Noll, professor of public policy at Stanford University's graduate school of business.

Noll also dismissed Gates' contention that some of the states' proposals would permanently undermine the usefulness of Windows.

"The issue,'' Noll said, "is whether it's really going to reduce innovation in all software markets if you don't let Microsoft innovate as it wants to.''

But by day's end, back-slapping Microsoft lawyers appeared jubilant that their calculated risk to put Gates on the witness stand did not backfire.

"I think he made his case well,'' one Microsoft official said. "He showed he was more familiar with the state's proposal than they were.''

Gates "didn't lose his cool,'' agreed Robert Lande, a University of Baltimore law professor, who has been sympathetic to the states' antitrust case. "This is a real departure from the Bill Gates we usually see.''