In his first public comments following the Department of Justice's accusation that Microsoft is abusing its dominant market position, Microsoft CEO Bill Gates dismissed the potential of a fine of $1 million a day as a nonissue, and characterized the government's action as an attempt to stifle innovation. "What is at issue is the interpretation of the word integrate," Gates said. He further elaborated, "Should they [the Department of Justice] decide what future innovation we can or cannot do?" Gates made his comments during a previously scheduled fireside chat at the Agenda `98 technology conference being held this week in Phoenix. Usually journalists regard comments made during this annual conference as off the record. Gates agreed to lift the nondisclosure caveat at the journalists' request. In a surprise move on Monday, the Department of Justice asked a federal district court to levy a fine of $1 million a day and to force Microsoft to unbundle a licensing agreement that requires PC makers who buy the company's Windows 95 operating system to also license and distribute the company's Internet Explorer Web browser. The DOJ contends that the bundling violates a 1995 consent decree banning anticompetitive practices. A relaxed Gates told cohost Stewart Alsop that the integration of the Internet Explorer browser was "clearly allowed" under the terms of the consent decree. He said the government is operating under "some strange definition of integration" in contending that the Microsoft browser oversteps the decree's bounds. Gates dismissed the possibility of the proposed fine's altering Microsoft's strategy, saying, "There is no fine; nobody ever pays a fine." The issue will ultimately be resolved in the courts. In a testy response to Alsop's questioning, Gates said, "Whatever the judge says to do we'll do. That is the way things work in this country." Gates characterized the media coverage of the DOJ action, and of an earlier breach of contract suit Sun Microsystems filed against Microsoft over a Java-language licensing agreement, as "asymmetric." He complained that the massive coverage the filing of these suits generates is hardly matched by the coverage of their resolution. Gates suggested that political pressure from browser rival Netscape may have spurred the Department of Justice to action. As for Microsoft's delayed introduction of its Windows 98 product, which features the fully integrated Internet Explorer, Gates said the delay was due to the company's desire to include utilities that aid in the transition from its older 16-bit Windows 3.1 product. The Windows 98 release should be complete by midyear, according to Gates. The crucial issue in the DOJ action from Microsoft's perspective is whether the company will continue to be able to innovate within the base operating system, Gates said: "You have to control your own product. We're asking for that right."