Microsoft Trial -- The Gates Deposition: 684 Pages Of Conflict

MICROSOFT SAID LAWYERS for the government have used "snippets" of testimony to make Bill Gates look bad in the antitrust case. A review of his entire deposition shows that throughout, Gates quibbled, dodged, shot sarcastic comments - and stuck to his guns.

WASHINGTON - At one point in his confrontation with antitrust enforcers last summer, an exasperated Bill Gates vented his frustration at the relentless questioning.

"You," the Microsoft chairman told the government's interrogator, "don't seem to like the facts!"

A Seattle Times review of the entire transcript of the now-famous deposition of Gates reveals the intense, bitter and dramatic struggle between the opponents in the historic antitrust trial under way in federal court in Washington, D.C.

When the government first played videotaped excerpts of the pretrial questioning after the trial began in October, the company denounced the tactic as an unfair use of out-of-context "snippets."

But a look at the 684-page transcript reveals that the government has accurately portrayed the excerpts. At the same time, it details the titanic struggle between the world's richest man and antitrust enforcers persistently attempting to pry details to help their case.

The deposition also reinforces the steadfastness with which Gates stuck to the software company's business explanations for activities the U.S. Department of Justice and 19 states now say were illegal. And it foreshadowed the defiant testimony of the Microsoft's executives who appeared on the witness stand in U.S. District Court.

When Gates gave answers to questions that chief government litigator David Boies didn't like, the experienced trial lawyer would rephrase the question, sometimes dozens of times, to wrest an answer.

Gates also set the tone in his deposition for his executives in another way, dodging questions and quibbling with words - a tactic far less successful in court, where U.S. District Judge Thomas Penfield Jackson has little tolerance for semantic debates and often cuts short such evasiveness with sharp questioning of his own.

About eight hours of the deposition, selected by both the government and Microsoft, have been made public in federal court since the trial began in October.

But the rest of the pretrial questioning is about to be unsealed; the U.S. Court of Appeals ruled Jan. 29 that the deposition is a public record and should have been open to the public. Microsoft has declined to seek further appeal.

What's new

Among the new material in the deposition transcript, Gates:

-- Testified that IBM pays more for licensing the Windows operating system than other computer manufacturers because the Armonk, N.Y., company declined to participate in some marketing programs.

-- Denied allegations that Microsoft tried to collude with Apple Computer and RealNetworks by attempting to divide the market for software that plays audio and video over the Internet.

-- Expressed surprise at the Senate Judiciary Committee testimony of RealNetworks Chief Executive Rob Glaser, a former Microsoft executive. Gates said he had never considered Glaser a competitor until "he went out of his way to lie about us." After Glaser's appearance, "I sort of thought, `Hmm, he must be a competitor.' "

-- Repeated many of the Microsoft defenses, now familiar after more than four months of trial, for various activities under scrutiny. When confronted with contradictory documents, e-mail and evidence, Gates didn't budge from his version of events.

-- Said he deletes 98 percent of his e-mail messages, asserting that neither he nor Microsoft's public-relations firm, Waggoner Edstrom, has ever intentionally deleted documents sought by the government relating to Microsoft's competitors.

200 `I don't knows'

The combative deposition spanned 20 hours and was taken Aug. 28 and 29 and Sept. 2 at Microsoft's corporate campus in Redmond.

While the deposition has been widely seen as a problem for Microsoft, Gates treated it nonchalantly while it was under way. Between the second and third days of questioning, Gates even attended a star-studded birthday cruise thrown by Paul Allen, the co-founder of Microsoft.

When he returned, Gates described for questioners what he had said on the trip.

"I can recall some people saying, `Must have been rough,' and my saying, `Well, it's like depositions I've been in before,' " Gates said.

One notable point in the deposition is Gates' apparent lack of forthrightness, which already could have damaged his credibility with Jackson, who called his deposition "troubling."

The portions of the deposition that have not been disclosed publicly are unlikely to reverse the impression of obfuscation the government has described as "an astonishing lack of recall."

The famously hands-on Microsoft chief answered deposition questions with "I don't know," "I don't remember" or "I don't recall" more than 200 times.

Sarcastic exchanges

But the transcript does shed some more light on the performance of Boies and New York antitrust attorney Stephen Houck, who both responded with like-minded stubbornness and often matched Gates' notorious sarcasm with equally dismissive comments.

"Aren't you just trying to substitute different words for the word that you actually wrote that you think will sound better in the context of this litigation?" Boies asked at one point. When Boies persisted, asking Gates whether he would be more comfortable if the e-mail were characterized another way, Gates barked back: "I've never been comfortable with lawyers mischaracterizing the truth."

At another point, Gates responded to a question saying, "If I realized how you might misinterpret the thing, I would have put a little footnote in here for you to help make sure you didn't misinterpret it."

Boies and Houck reminded Gates nine times that he was under oath and began questions with "Is it your testimony" more than 20 times, sometimes adding, "as you sit here under oath." They wielded the phrase with the implication that the previous comment was an error or misleading, as if to say, "You don't expect us to believe that, do you?"

In other parts, Boies and Houck seemed somewhat confused by either the technology or Gates' efforts to pick apart their questions and at other times they backed off major areas of inquiry, such as pricing.

The government in court has alleged that, as a monopoly, Microsoft has the power to set prices in an arbitrary and discriminatory fashion. It has done so, the government says, in ways that favor companies loyal to Microsoft's chief demands and punish companies that cross its path.

During the trial, the government attempted to use pricing data to show that companies such as Compaq and Dell got better deals than IBM, a company with a checkered history with Microsoft.

But when Gates was asked about the issue on the third day of his deposition, the government still had not obtained detailed pricing information, and the questioning was not as lengthy as it was on other matters.

Gates testified that the prices Microsoft charges computer makers - on average about $50 a copy - can vary depending on how many copies the computer company purchases and other factors.

"It's typical that somebody with larger volume asks for and gets somewhat lower pricing than somebody who doesn't have high volume," Gates said. "There's not a perfect correlation to volume, but there is a correlation there."

Gates also said that it wasn't necessarily related only to volume, but also could deal with how well the company markets Windows.

"There are some things in terms of the relationship and marketing that I think IBM has been reluctant to do, so it may be that because of their view of those terms and their decisions on that, IBM may have a somewhat higher price than people with a similar volume. Although, you know, their volume is - nobody has the same volume."

There were no follow-up questions.

The document-destruction issue

In another line of questioning that seemed to go nowhere, Boies asked Gates about destruction of documents, particularly relating to the DR-DOS operating system, a competitor to Microsoft's MS-DOS.

Microsoft is being sued separately by Caldera, which holds patent rights for DR-DOS. The company contends Microsoft illegally used its market power to prevent DR-DOS' success.

Asked Boies: "Are you aware of any destruction or disposal of documents relating to DR-DOS?"

Replied Gates: "It's possible somebody once upon a time sent an e-mail message to somebody else that DR-DOS was part of the subject of that e-mail and then the person deleted that message."

Boies: "When you say it's possible that someone did that, were you involved in that, Mr. Gates?"

Gates: "I doubt that every e-mail message I ever received that had the word DR-DOS in it, that I choose to preserve forever after."

Carving up markets denied

Throughout the deposition, Gates repeatedly denied allegations of attempting to cut deals with competitors not to compete and to divvy up segments of markets to ease competition.

For example, Gates denied that Microsoft attempted to divide the market for playing audio and video with Apple. Although an Apple executive testified in the trial to the contrary, Gates said there was no attempt to get Apple to stop competing with Microsoft's products. Instead, Gates said, the two companies discussed making the technologies work better together.

"They wouldn't have to stop anything," Gates said.

Gates also denied making a similar offer to RealNetworks, despite pretrial testimony from Bruce Jacobsen, a top RealNetworks executive at the time, who told government questioners that Microsoft wanted RealNetworks to "cease to be a competitor."

The allegations - and those of Glaser at the Senate Judiciary Committee, where he accused Microsoft of sabotaging Real's competing software - left Gates "confused."

Boies: "Did you consider that company to be a competitor of Microsoft?"

Gates: "I think I was confused about what RealNetworks - what their plans were, and I wasn't sure if they were a competitor or not."

Boies: "Was there a time when you did become convinced that they were a competitor?"

Gates: "Yes."

Boies: "When was that?"

Gates: "When Rob Glaser appeared in Washington, D.C."

The meeting with Netscape

Another alleged market-division incident got ample attention when Gates was questioned at length about a July 21, 1995, meeting between Netscape and Microsoft executives. Microsoft contends that the meeting was a benign attempt to develop a cooperative agreement; Netscape officials alleged there was an explicit request from Microsoft not to compete for browsers sold to users of Windows 95.

When presented with one particularly blunt e-mail written by Microsoft executive Dan Rosen about the meeting, Gates went to lengths not only to distance himself from Rosen's accounts but to undermine his credibility.

Gates' instincts seemed reinforced by Rosen's trial performance. Presented as the witness who would explain Microsoft's view of the June meeting, Rosen's credibility was called into question.

While Rosen testified that archrival Netscape posed no significant threat to Microsoft in 1995, Jackson repeatedly shook his head, asked pointed questions and expressed frustration as Rosen rattled off a series of statements that contradicted previous Microsoft witnesses, executives and Gates.

Rosen's e-mail that was brought up during the deposition seemed to buttress the government's case by summarizing the meeting's goals as establishing ownership of the Internet browser in Windows 95, having Netscape "add value" to other Windows products, and sending a message to the marketplace that Netscape and Microsoft were cooperating on Internet issues.

Asked if he remembered discussing these goals before the meeting, Gates replied simply, "No."

Houck then read this from the e-mail, in which Rosen quotes another Microsoft view of meeting - whether Netscape planned a head-to-head battle for the browser market, or whether Netscape would "build on top" of Microsoft's browser: "Chris Jones (Microsoft employee) summed up the purpose nicely: `We need to understand if you will adopt our platform and build on top of it or if you are going to compete with us on the platform level.' "

Gates denied that summary and pointed to a more benign view of the meeting:

"It says in the Rosen memo the purpose of the meeting was to scope out specific areas that the relationship between the two companies might take and to set in place a process to either conclude a strategic relationship or go our separate ways."

Another prickly exchange

Houck then asked what he remembered about the purpose of Microsoft executives attending the meeting.

"Well," Gates said, "there were no Microsoft executives in the meeting." The two then sparred on the meaning of "executives," with Gates saying that only vice presidents are executives.

Houck rephrased the question, asking the goal of "Microsoft employees who attended the meeting with Netscape on June 21, 1995?"

Referring to e-mail, Gates replied, "I can read to you from the stuff you've given me here."

Houck: "I don't want you just to read; I'm asking for your present recollection, if you have one."

Gates: "I don't know what you mean my `present recollection.' "

Houck: "As you sit here today, do you have any recollection as to what your understanding was back in June 1995 as to the principal purpose of the Microsoft employees in the meeting with Netscape?"

Gates: "I wasn't involved in setting up the meeting, so I, I can see what (Microsoft executive Tom) Reardon said here, I can see what Rosen said here."

Gates then said he had no view of what occurred. He added: "So usually if you have two people that go to a meeting and one comes back and says, `Looks great,' and the other comes back and says, `It doesn't look good,' my business experience is the person who says it doesn't look good is probably the one who has the most accurate view of the meeting, particularly when you're dealing with Thomas Reardon and Dan Rosen."

Define `definition'

The sniping was not limited to the government and the witness. Microsoft attorney David Heiner was featured in many of the nastier exchanges. At one point, Heiner jumped into a Gates-Boies spat and said: "Will the antitrust division of the United States, when it tries this case, present snippets and fragments as it did in the fall in the consent decree case?"

Boies replied, "One of the things about a trial is we both get our shot."

During the deposition, however, one thing Boies began to doubt was whether Gates would make his case in court by testifying. When Boies asked Gates if he planned to testify, he said he didn't know.

The transcript also is filled with the kind of quibbling over words already seen in the videotaped excerpts played in court. The semantic sparring reached an almost absurd level when, during questioning about a newspaper article in which Gates is quoted, Gates began debating with Boies over the meaning of the word "define."

"If you define `definition' for this conversation in a loose way, then I'll understand what you mean," Gates said.

Boies replied: "What you need in order to understand the question is to have me define what is meant by `definition'?"

Gates: "At least loosely."

Boies: "What I mean by definition is what you meant by definition when you said that you wouldn't have answered this question (from a newspaper reporter) unless you had a definition of a word."

They finally agreed that they could define "definition" as "common understanding."

Dogged questioning

Boies and Houck were just as obstreperous.

On the second day of the deposition Boies spent a long time going over allegations regarding Sun Microsystems - far more than the short excerpts played in court.

The government alleges that Microsoft licensed - and then changed, or "polluted" - Sun's Java programming language so that it would not perform the main function for which it was invented: allow programs to work on different operating systems without having to be rewritten for each.

The government contends that such changes were part of an illegal plot to maintain the monopoly Microsoft is alleged to have with its Windows operating system.

Boies repeatedly asked questions about an e-mail from Microsoft executive Ben Slivka in which Slivka described questions that Gates had posed regarding Sun's Java. "You had a lot of pretty pointed questions about Java. 1) What is our business model for Java? 2) How do we wrest control of Java away from Sun?"

Gates said, "I doubt I used words like that." Gates then explained that Microsoft was trying to develop a version of Java that ran better and faster.

After repeated questions about Sun and Java and the e-mail, Gates said, "I honestly don't know what you mean by `control of Java.' I know those words are in the e-mail from Mr. Slivka. But when you're asking me the question, I don't know what you mean, `control of Java.' "

After several more questions, Boies then said he would press the question another 30 seconds "and then I will stop." Despite the promise, Boies then proceeded to ask 22 more questions.

One of the most telling exchanges occurred on the first day, lending some insight into the ferocity of the words used throughout.

"Did you ever come to the point where you seriously reached the conclusion that Microsoft was likely to be put out of business by the Internet?" Houck asked.

The question seemed to elicit a fundamental truth of the Microsoft culture.

"Our risk of being put out of business," Gates said, "has been a constant feeling for me ever since we've been in business."

James V. Grimaldi's phone message number is 206-464-8550. His e-mail address is: