Microsoft argues there's no evidence it broke the law.

Hostilities resumed in the landmark Micrcosoft antitrust trial Friday, with the combatants filing written arguments that had Microsoft dismissing the government's case as "bluster" and the U.S. Department of Justice attacking the "bizarre assertions" of Bill Gates.

Friday was the deadline for each side to submit revisions of the proposed findings of fact filed last month. In those initial filings, each side presented the facts it thought best supported its case. In its revised filing, Microsoft dwells on its argument that it has no monopoly power.

The DoJ and 19 state attorneys general filed suit against Microsoft in May 1998, accusing it of violating antitrust law by, among other things, illegally tying its Internet Explorer browser to its Windows operating system and foreclosing Netscape from distributing its browser. But Microsoft argued that the DoJ's evidence hasn't been sufficient to prove it broke the law. "The fanfare of the trial is over; it is now time to look at what the evidence shows," the filing reads. "Despite their bluster, plaintiffs have failed to prove their case."

Microsoft said the DoJ has adopted an inconsistent definition of market power. For example, Microsoft said DoJ attorneys are using a narrow definition, such as software that runs on Intel-compatible PCs, but then they are accusing Microsoft of trying to combat products that are outside that market, products such as Java and Netscape's browser.

Microsoft also denied the DoJ's argument that significant barriers to entry exist, pointing to alternative operating systems such as Linux and the BeOS, which both run on Intel chips. The company also accused the DoJ of abandoning its tying claim (the charge that Microsoft illegally bundled Internet Explorer with Windows), which originally sparked the case. What's more Microsoft said the government hasn't shown that it prevented, or foreclosed, Netscape from shipping its rival browser. And it said that the DoJ has relied on inadmissible evidence, including hearsay such as executive quotes in newspaper articles.

Not surprisingly, the DoJ took a contradictory position in its revised filing. Federal prosecutors reiterated claims that Microsoft does have a monopoly. The DoJ said the fact that a substantial increase in the price of Windows will not cause consumers to look elsewhere proves that the company can dictate prices. "Microsoft's monopoly power is proven by the uncontradicted evidence that Microsoft's customers have no viable commercial alternative to Microsoft's operating system," the filing said.

The DoJ said Microsoft's own witness, economist Richard Schmalensee, agreed with the assertion that there's currently no commercially viable substitute for Windows.

But the government saved its harshest words for Gates, Microsoft's chairman and founder, who appeared in hours of videotaped testimony shown at the trial. The government said evidence at the trial showed Microsoft recognised in mid-1995 that Netscape's browser "seriously threatened to erode" one of the pillars of its monopoly. The government said the evidence for that proposition was undisputed, "except for bizarre assertions by Mr. Gates in his deposition."

Gates had written memos in mid-1995 raising a red flag about Netscape's competitive abilities, and those memos were among the documents offered by the government in evidence. But in his taped testimony, Gates said in mid-1995 he was unaware of any threat posed by Netscape. The government said that in the face of all the evidence, Gates' assertion "that he was not aware at the time even what Netscape was doing ... is simply not credible."

The DoJ also poked holes in Microsoft's claims that other companies are poised to topple it at any time, which has been a strong component of its defence. The DoJ criticized Microsoft for citing products as competition, including 3Com's Palm handhelds and the Microworkz's iToaster desktop, "presumably with a straight face."

"Vague speculation about conditions years in the future does not, and cannot, vitiate the fact that for the present Microsoft possesses monopoly power," the filing said. In its filing, the DoJ also claimed that Microsoft's witnesses consisted mainly of company employees -- whose testimony often contradicted their documents -- with few outside observers. In addition, DoJ said Microsoft dropped its only reliable technical witness, Michael Dertouzos of MIT, because he would not agree with their claims.

The collection of fact-finding documents contains the facts that each side thinks best support its case. They also act as a summary for U.S. District Court Judge Thomas Penfield Jackson, who alone will issue a ruling in the case.

Friday's filings are among the last steps in a trial that began last October. The judge is expected to issue a ruling on what he considers the facts of the case as early as next month. After that, each side will file what's called proposed conclusions of law, or how they think the law should apply to those facts. The judge will issue a ruling sometime after that. However, even that isn't expected to wrap up the case, which probably will be tied up in appeals for years.

Reuters contributed to this report.

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