Netscape Honcho Grilled

Lawyers for Microsoft on Wednesday interviewed executives involved in America Online's nearly $10 billion purchase of Netscape after a judge questioned whether the deal might affect the outcome of the Microsoft antitrust trial.

Microsoft lawyer Michael Lacovara questioned Peter Currie, Netscape's chief administrative officer. Currie also is Netscape's former chief financial officer and helped put together the company's sale to AOL, which was finalized last month. (Editor's note: CBS News is the broadcast news provider for America Online.)

In a highly unusual twist, reporters were allowed to attend at least part of Currie's interview at a hotel in downtown Washington because of an obscure 1913 law covering antitrust depositions, which are normally conducted in private. Lawyers can close the room when issues turn to confidential business plans, but the first hour of Wednesday's deposition was open.

Lacovara asked Currie mostly about the origins of the $9.9 billion purchase of Netscape. He said the first serious discussions "would have been in the early part of September (1998)" but discussions actually started in late August.

The 1913 law also forced the disclosure of transcripts from more than 90 depositions already taken in preparation for the trial. Most of those, including three days of interviews with Microsoft Chairman Bill Gates, were made public Wednesday.

The Gates transcripts partly duplicate snippets of testimony already played in court, but also include new sections related to Microsoft's dealings with Netscape and other companies.

Gates reluctantly admitted that Netscape's software for scanning the Internet, called a browser, was Microsoft's prime competitor at the dawn of what lawyers in the case refer to as the "browser wars."

"At some point, we definitely thought of the Netscape browser as the No. 1 in terms of how our Windows browsing would be compared by users and which they would select," Gates said.

In early 1996, Netscape's browser, called "Navigator," held more than half the market for browsers, dwarfing Microsoft's rival "Internet Explorer" product.

The government accuses Microsoft of illegally using its influence as the maker of the dominant Windows operating systems to defend its monopoly and try to extend into new markets, including Internet browsers.

Gates' hedged admission followed lengthy verbal gymnastics during the September 1998 deposition with government lawyer David Boies. Gates tried hard to avoid even saying the word "Netscape," but eventually relented.

U.S. District Judge Thomas Penfield Jackson previously decided to allow Microsoft, in the middle of its antitrust trial, to begin gathering evidence about the implications of AOL's stunning $9.9 billion purchase of Netscape.

AOL, with nearly 17 million subscribers, is the world's largest Internet provider. Netscape produces successful Wb browsing software and owns Netcenter, one of the most popular sites on the Internet.

Shortly after the sale was announced in November, the judge suggested that there "might be a very significant change in the playing field."

Microsoft asked Currie when the Justice Department was notified about the deal, since it could affect its legal case against Microsoft.

"I don't know when the Justice Department was informed, maybe September," Currie said. But, he added, the implications of the purchase on the trial were "not my bailiwick." He said the companies knew the arrangement could affect the ongoing trial, but decided that "we need to make decisions about the business and treat the trial as a separate issue."

As part of its antitrust case, the government alleges that Microsoft illegally wields its influence as the manufacturer of the dominant Windows operating system, which is used to run most of the world's personal computers.

For example, government lawyers say that Microsoft forces consumers who buy Windows also to use its bundled Internet software, discouraging people from using rival Web software, such as Netscape's.

Part of the Justice Department's arguments in the courtroom have focused on AOL's decision in March 1996 to distribute Microsoft's browser, not Netscape's, to its millions of subscribers.

But with AOL's purchase of Netscape, Microsoft executives, including Gates, expect AOL eventually to distribute Netscape's browser, giving it a dramatic boost. AOL is contractually obligated to continue distributing Microsoft's browser until January 2001.

Another deposition was set for Friday in San Francisco, where Microsoft was expected to question Mike Popov, vice president and chief operating officer at Sun Microsystems Inc. It also will be open to the public and media.

Written By Ted Bridis, Associated Press Writer