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In contrast to his last appearance on video in the long running legal saga, when he seemed to be badly informed and rather evasive, Gates impressed watching legal experts with his demeanour and his willingness to go on the offensive when questioned. However, Andrew Gavil, a Howard University law professor, told Reuters that although a 'kinder a gentler Bill' showed himself this time, 'he's still quibbling over technicalities and he's still avoiding answering some questions directly.'

Gates' appearance on the stand followed a 155-page written testimony and is expected to last through today and possibly into Wednesday.

The Microsoft founder, chairman and chief software architect is arguing that if the nine states get their way, the very existence of Windows is threatened. In his written testimony he insisted that the proposed penalties would, 'undermine all three elements of Microsoft's success, causing great damage to Microsoft, other companies that build upon Microsoft's products, and the businesses and consumers that use PC software.'

The nine states are proposing a series of 'remedies' that will involve Microsoft having to create modular version of Windows from which so-called 'middleware' components can be extracted and replaced with similar products from other software developers. The company will also be obliged to make the source code for Windows and applications available to these developers.

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Middleware components include Internet Explorer and Windows Media Player.

Gates insists that because of the 'complexity' of Windows and its tight integration, 'Microsoft cannot ensure that "the binary code for each Microsoft Middleware Product" could be removed without degrading the rest of the operating system. ...every function that depends upon the removed software will fail.'

He also argued that removing the middleware products will also prove a disincentive to the further development and improvement of Windows. Currently, Gates said, around 15 per cent of the price of Windows covers the $100 million annual development costs for the Internet Explorer Web browser. If PC manufacturers (OEMs) have the option to to buy a modular and cheaper version of Windows with the browser removed - as the states are suggesting - and substitute a free browser from elsewhere this could cost Microsoft 'roughly' $10 billion revenue over the next ten years.

Moreover if Microsoft is compelled to make the source code for its browser freely available, then the OEMs could 'add back a free version of the exact same 'browser'.'

'Why,' Gates asks, 'would any rational business enterprise in Microsoft's position continue to invest in Web browser innovation, whether as part of Windows or separately from Windows?'

In the long-term 'if the stability and consistency of Windows is not maintained' by OEMs 'acting in their short term self interest', everyone will suffer. 'When PCs become less reliable because the quality of Windows has been compromised, when consumers must undergo retraining to operate different brands of PCs because of differences in their user interfaces, when applications written for one version of Windows will not run on another version, the entire PC ecosystem will suffer.'

Gates entire written testimony and selected extracts are available to read online here.