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In the United States District Court for The IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA STATE OF NEW YORK ex. rel. Attorney General ELIOT SPITZER, et al., Plaintiffs, v. Civil Action No. 98-1233 (CKK) MICROSOFT CORPORATION, Defendant. DIRECT TESTIMONY OF BILL GATES SUMMARY TABLE OF CONTENTS I. MICROSOFT’S ROLE IN FOSTERING INNOVATION..................................... 4 A. Microsoft’s Development of a Standard Computing Platform.......................... 5 B. New Technology Initiatives.......................................................................... 14 II. Key Aspects of Microsoft’s Business that Are Imperiled by the NSPR......................................18 . The Platform Value Provided by Windows................................................... 18 A. Microsoft’s Promotion of Interoperability..................................................... 32 B. Intellectual Property Rights........................................................................... 41 III. The NSPR............................................................................................................. 44 . Overarching Problems................................................................................. 45 A. Section by Section Analysis......................................................................... 61 TABLE OF CONTENTS I. MICROSOFT’S ROLE IN FOSTERING INNOVATION...................................... 4 A. Microsoft’s Development of a Standard Computing Platform.......................... 5 B. New Technology Initiatives.......................................................................... 14 3. .NET.............................................................................................. 15 4. Trustworthy Computing................................................................... 17 II. Key Aspects of Microsoft’s Business that Are Imperiled by the NSPR 18 . The Platform Value Provided by Windows................................................... 18 1. The Integrity of the Windows Platform............................................. 22 2. Innovation in Windows.................................................................... 24 3. Testing to Assure Product Quality.................................................... 28 A. Microsoft’s Promotion of Interoperability..................................................... 32 1. Development of APIs and Protocols................................................ 34 2. Disclosure of Technical Information.................................................. 35 3. Microsoft’s Open Review Process................................................... 39 4. Testing Interoperability.................................................................... 40 B. Intellectual Property Rights........................................................................... 41 III. The NSPR............................................................................................................. 44 . Overarching Problems................................................................................. 45 1. Breadth of Regulated Product Categories......................................... 45 a. “Any Microsoft Product”..................................................... 46 b. Middleware Definitions........................................................ 47 2. Vagueness and Ambiguity................................................................ 52 . Internal Inconsistencies........................................................ 53 a. Middleware Definitions........................................................ 54 b. Ordinary Business Practices................................................. 60 3. Feasibility........................................................................................ 60 A. Section by Section Analysis......................................................................... 61 1. Section 1......................................................................................... 61 . Feasibility of Code Removal................................................ 62 a. Non-Settling States’ Explanations of Code Removal............ 69 b. Consequences of Code Removal......................................... 77 c. Pricing................................................................................. 79 2. Section 2......................................................................................... 84 . Section 2.a.......................................................................... 85 a. Section 2.b.......................................................................... 88 b. Section 2.c.......................................................................... 90 3. Section 3......................................................................................... 94 . Proliferation of Windows Variations..................................... 95 a. Consumer Confusion........................................................... 96 b. Slowed Growth of the PC Ecosystem.................................. 96 c. Security and Patents............................................................ 97 4. Section 4......................................................................................... 97 . Asset Expropriation to Enable Cloning................................. 99 a. Ambiguity and Feasibility................................................... 106 b. Consumer Harm................................................................ 110 5. Section 5....................................................................................... 112 6. Section 6....................................................................................... 115 . Section 6.a........................................................................ 116 a. Section 6.b........................................................................ 117 b. Section 6.c........................................................................ 118 c. Section 6.d........................................................................ 119 d. Section 6.e........................................................................ 120 7. Section 7....................................................................................... 120 8. Section 8....................................................................................... 121 . Acts Promoting Microsoft Software................................... 121 a. Joint Ventures and other Cooperative Efforts..................... 123 b. Intellectual Property Transfers............................................ 124 9. Section 9....................................................................................... 125 10. Section 10..................................................................................... 125 11. Section 11..................................................................................... 129 12. Section 12..................................................................................... 131 . Ambiguity of “Browser” Definition..................................... 131 a. Windows Fragmentation and Quality.................................. 132 b. Reduced Innovation and Competition................................. 133 13. Section 13..................................................................................... 135 14. Section 14..................................................................................... 139 . Why Microsoft Built Office................................................ 140 a. Reduced Innovation........................................................... 142 b. Consumer Harm................................................................ 145 c. Office for Apple Macintosh............................................... 145 15. Section 15..................................................................................... 148 16. Section 16..................................................................................... 150 17. Section 20..................................................................................... 154 18. Section 21.b.................................................................................. 155 DIRECT TESTIMONY OF BILL GATES 1. My name is William H. Gates III. I am the Chairman of the Board and Chief Software Architect of Microsoft Corporation. I am a co-founder of Microsoft and was its Chief Executive Officer from 1986, when the company went public, until January 2000. I made the decision to relinquish my duties as CEO so that I could spend more time working with the product groups at Microsoft to develop new technologies that will be necessary to enable the next generation of computing. 2. My work at Microsoft has encompassed nearly every aspect of the software business. I have written code and architected software products. In my positions at Microsoft I have met regularly with the leaders of small and large companies in the personal computer industry and in related businesses, including companies Microsoft works with to develop and distribute products, as well as with customers in the business world, in academia and in government. I closely track trends that might affect Microsoft’s business. 3. I am married and have two children. I have written two books, “The Road Ahead” (1995) and “Business@ the Speed of Thought” (1999), both of which deal with how innovative software technology can increase business productivity. 4. I am submitting this testimony to provide the Court with information concerning Microsoft’s development of new platform technology and how that technology is used by computer manufacturers,
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