BY TED BRIDIS
The Associated Press
WASHINGTON -- America Online emerged Thursday as a tough negotiator during its high-stakes deal with Microsoft and Netscape for an important contract in 1996. The deal ultimately boosted Microsoft's stake in the pivotal market for Internet software.
As the antitrust trial ended its second week, Microsoft sought to show that a Netscape-AOL proposal in 1996 included plans to illegally collude to avoid competing with each other.
A central allegation by the government against Microsoft is that it illegally offered to divide the market for Internet software with Netscape during a disputed June 1995 meeting.
Microsoft produced testimony and evidence Thursday it said showed that AOL, the world's largest Internet provider, pressed Netscape to give up a seat on its board of directors and, when it balked, demanded that AOL be allowed to run Netscape's popular Web site. Microsoft lawyer John Warden cited e-mail by AOL Chairman Steve Case sent after an hourlong talk with Netscape's chief executive officer, James Barksdale, in January 1996.
"I told him that if there was indeed no board seat, we would have to completely run their Web site so there is no risk of contention there," Mr. Case wrote to other AOL executives. "He seemed to prefer that."
The deal with Netscape never materialized, and in fact, AOL agreed in March 1996 to distribute Microsoft's browser rather than Netscape's. AOL also agreed not to distribute Netscape's browser to more than 15 percent of its customers, which the government charged was exclusionary.
Microsoft argued that AOL subscribers who are technically proficient enough can still use Netscape's software with the service. By late 1995, AOL genuinely feared the burgeoning growth of the Internet, which was largely fueled by use of Netscape's browser. The government contends Microsoft won the AOL agreement in 1996 not on the merits of its browser software but because it offered to include easy access to AOL's software in Windows, used by most of the world's desktop computers. Antitrust laws prohibit using monopoly power in one market to expand into others.
The government initially intended Thursday to show parts of its pretrial interviews on videotape with Microsoft Chairman Bill Gates, but time ran out.
Government lawyers have said they intend to show in court roughly eight of the 20 hours they spent this summer questioning Mr. Gates.
