Gates Claims Remedies Would Cripple Microsoft

Taking the stand for the first time on behalf of the company he helped found more than 20 years ago, Microsoft Chairman and Chief
Software Architect Bill Gates Monday testified that some of the remedy provisions sought by nine states in a 3
1/2-year-long antitrust case would cripple Microsoft and force it to pull the Windows operating system from the market.

“The practical effect of [the states’ provisions] would be to cripple Microsoft as a technology company,” Gates wrote in 155 pages
of written testimony submitted Monday before he took the witness stand.

He later added that the states’ remedies “would undermine all three elements of Microsoft’s success, causing great damage to
Microsoft, other companies that build upon Microsoft’s products, and the businesses and consumers that use PC software.”

He also argued that one of the states’ proposed remedies, which would require the company to offer a modular version of Windows
stripped of middleware like Internet Explorer and Windows Media Player, would prevent the company from licensing the operating
system within six months.

The provision would allow anyone who licenses 10,000 or more copies of Windows to request that Microsoft remove middleware
applications and allow the substitution of third-party applications.

“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 wrote.

He went on to testify, “If software code is removed, the Windows APIs provided by that code will no longer function.” This, he said,
would lead to the fragmentation of the operating system, greatly reducing the value of Windows as a platform for developers as well
as the software’s utility to consumers.

“By reducing Windows to some undefined ‘core operating system,’ the [states’ proposed remedy] would turn back the clock on Windows
development by about ten years and effectively freeze it there,” Gates said.

Gates also said complying with such a requirement would be “impossible” because it would necessitate re-engineering the firm’s
products “to ensure that any of 4,096 combinations of operating system software would comply with [the proposal].”

Gates also argued against a proposal that would require the company to release APIs and other technical information about the inner
workings of some of its products. The proposal is intended to allow software developers to create applications which integrate as
well with Windows as Microsoft’s own applications. However, Gates said the proposal would stymie Microsoft’s incentive to continue
creating new technologies because it would constitute a “massive transfer of Microsoft’s intellectual property rights.”

“As I understand it, providing Microsoft’s technology to competitors so they can build ‘functional equivalents’ of our products now,
and match all our future innovations for 10 years, is in fact one of the central objectives,” Gates said.

He added, “With free access to Microsoft’s technology, competitors could build a clone of Windows and their own version of Office
without bearing any significant part of the R&D expenses that Microsoft incurred to build the technology.”

Microsoft is attempting to fight off the states’ remedy proposals in favor of the much friendlier terms it reached in a settlement with the U.S. Department of Justice and nine
other states.

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