Inside Microsoft's Defense Strategy
Here's a preview of how the software giant's witnesses will combat Justice, point by point

Now it's Microsoft's turn. After absorbing the Justice Dept.'s best shots, the company is finally getting its chance to disprove government charges that it has committed predatory business practices. Defense lawyers put on their first witness, economist Richard Schmalensee, on Wednesday, Jan. 13. After Schmalensee steps down, which should be in the coming week, the next witness is scheduled to be Paul Maritz, Microsoft's group vice-president for platforms and applications. Then in the hotseat: James Allchin, senior vice-president for personal and business systems.

How will Microsoft rebut Justice's major charges, including abuse of its monopoly in operating systems, bullying business partners, and bundling its browser into Windows, among others? Here's Microsoft's line of defense for the next half of the trial, according to Microsoft spokesman Mark Murray and one of the company's legal advisers, who asked to remain unnamed:

Monopoly: Microsoft will argue that the government's entire case is based on the assumption that Microsoft is a monopoly. The responsibility for attacking this position will fall primarily into the hands of economist Schmalensee, a professor of economics at Massachusetts Institute of Technology and dean of its Sloan School of Management. But he won't be alone. Group Vice-President Maritz will argue that the company faces lots of competition in the operating system business and thereby has a less impregnable position than the trustbusters claim.

Bullying: In the eyes of most trial watchers, the government's strongest charge is that Microsoft put too much pressure on its business partners not to market Netscape Communications Corp.'s browser. It did this, Justice claims, by forcing its partners to sign exclusive contracts. Because of the strength of the government's evidence on this count, Microsoft is devoting more witnesses to addressing this issue than any other. Brad Chase, vice-president for Windows marketing and developer relations, will argue that Microsoft's controversial contracts were less exclusive than the government claims. Among other things, Chase will testify, computer makers were not prevented from loading Netscape's browser on the computers, or even from putting an icon for it on the first screen of their computers.

Senior vice-president Joachim Kempin, the company's lead negotiator with PD makers, will add that users are free to reconfigure the opening screen as they wish. These points will also be reinforced by John Rose, senior vice-president for enterprise computing at Compaq Computer Corp., one of Microsoft's two outside witnesses. The job of defending the company's contracts with Internet service and content providers, meanwhile, will fall to Internet customer unit vice-president Cameron Myhrvold and Windows business development senior director William Poole, respectively.

Tying: One of the feds' most important charges against Microsoft is that it was illegal for the company to bundle its Internet Explorer into its dominant operating system. James Allchin, senior vice-president for personal and business systems, will fight this claim by describing the benefits of integrating Internet browsing into Windows. In response to government charges that Microsoft bundled IE into Windows only to beat back the competitive threat from Netscape, he'll also recount the history of Microsoft's browser development, arguing that it started in 1993 -- before Netscape even existed.

He'll also tell the judge that the code for Windows and IE are completely integrated, and that other developers of operating systems, including IBM and Apple, also bundle Internet browsers into their products. Michael Devlin, president of Rational Software, an independent software developer, will pitch in by describing how his company's costs would increase if IE wasn't included in Windows.

Dividing Markets: Executives at Netscape, Apple, and Intel have all testified that, on separate occasions, Microsoft proposed illegally dividing different parts of the technology market. Since the Netscape charge is the most important one, the key Microsoft witness will be Daniel Rosen, who attended the controversial June, 1995, meeting where Microsoft allegedly proposed divding the browser market. Rosen will be backed up by Maritz, who will describe Microsoft's business relationship with Apple and Intel, and attempt to persuade Judge Thomas Penfield Jackson that Microsoft was guilty of nothing more than hard bargaining.

Java: As evidence that Microsoft tries to kill any threat to its operating systems monopoly, Justice says the company tried to sabotage Sun Microsystems' Java programming language. Microsoft's senior vice-president for applications and tool groups, Bob Muglia, will counter this charge by testifying that Microsoft improved Java. He'll also note that under Microsoft's license with Sun, it was entitled to create a version that was "optimized" for Windows.

Harm: Has Microsoft harmed consumers? The company says "No." Most of the responsibility for proving this point will fall to economist Schmalensee. But Devlin will also contribute by describing how Windows lowers costs for independent software developers and speeds up product development time. Allchin will also describe how integrating new features such as browsers into the operating system helps consumers.

One wild card in the witness lineup is whether Microsoft will call Chairman William H. Gates III to testify. What would Gates talk about? As a hands-on chief, deeply involved in the company's business dealings, he would probably touch on just about every one of Justice's charges.

France is Business Week's Legal Affairs editor; Green is an Information Technology staff editor