Microsoft chairman and chief software-architect Bill Gates ended three days of testimony yesterday with a warning.

Gates said the remedies sought by the non-settling states will take away Microsoft’s incentives to innovate, sending the company’s multibillion dollar research-&-development engine “into a ten year period of hibernation”.

He criticized the remedy for its ambiguities and for a “breadth of restrictions” so broad that it would lead the company to pull Windows from the market.

Closing his cross-examination, dissenting States’ attorney Steven Kuney turned attention back to the central drama of the 1998-99 antitrust trial: Microsoft’s impact on Netscape’s Navigator browser.

Focusing on the states’ remedy plan to require that Microsoft make Internet Explorer open-source, Kuney went through the violations cited by the court of appeals that he claimed “contributed significantly” to Explorer’s dominant market position “at Navigator’s expense”. Gates countered that other factors also contributed to Netscape’s decline.

Threats For Macintosh users, Kuney asked Gates to discuss the states’ proposal regarding porting the Office suite. “It’s called porting, but it’s giving away,” Gates said, drawing laughter from the courtroom.

Kuney asked why Gates claimed the states’ provision forcing it to continue developing Office for the Macintosh would be burdensome, since it’s a product the company already updates. The provision calls for Microsoft to release the same number of Office versions for the Mac as it does for Windows, and with consistent features – which isn’t something the company does now, Gates said.

“Being required over a period of ten years to do that work, regardless of the Macintosh market, with things we don’t do today, we find that a negative requirement,” he said.

Gates also admitted to having threatened then-Apple CEO Gil Amelio at one time during business negotiation, reports.

He accepted that he’d asked Amelio: “How should we announce the cancellation of Mac Office?” after Apple chose Netscape’s browser over Microsoft’s. Gates claimed the DOJ decree would “prevent things like this”.

The US Department of Justice and nine other states agreed to a settlement with Microsoft last November; the dissenting states want tougher restrictions on the company’s business-practices. District Judge Colleen Kollar-Kotelly is being presented with proposed remedies from Microsoft and the nine states.

Kuney asked whether Microsoft could engineer Windows to still perform all of its functions except for playing media if the company removed the Windows Media Player from the operating system.

Gates said no – the company would have to recreate the Windows Media Player and include it in the operating system, which would be in violation of the states’ proposed remedy. He made the analogy of pulling the heart out of a human body without causing degradation to the body’s functioning, but without putting the heart back in, either.

Fragmentation Kuney showed that Windows XP Embedded (a flavour of Windows XP for non-PC hardware such as mobile phone and PDAs) is designed to let users select which middleware elements they want included in the operating system.

For example, Kuney showed a screenshot describing Windows XP Embedded with six versions of Internet Explorer from which to choose.

Kuney asked if a user could create a version of Windows XP Embedded for the PC that ran all the same applications as Windows XP. No, answered Gates, because the embedded version doesn’t include an installer – so no new software could be put on the PC running Windows XP Embedded. In addition, Microsoft’s licensing of Windows XP Embedded doesn’t allow for distribution of the operating system running on a PC, Gates said.

Moving to the topic of Windows’ fragmentation – another potential result of the states’ remedies, according to Gates – Kuney asked whether the operating system is already fragmented because Microsoft updated the desktop in Windows XP, making it different from earlier versions. Kuney asked if users have to go through a learning period every time they update Windows. Yes, said Gates, “but you don’t have to go take a course.”