Microsoft general counsel William Neukom: "Government regulation would hurt consumers"

In a trial described as "Goliath vs Goliath", Microsoft lawyers rejected accusations it had used its dominant market position to try to squeeze out competitors, saying the government was trying to "demonise" Mr Gates.

"Microsoft hasn't denied consumer choice, it IS consumer choice," Microsoft attorney John Warden told the court. "The antitrust laws are not a code of civility in business."

"A personal attack unleashed by the government on such a visionary as Bill Gates is no substitute for proof," said the lead counsel for Microsoft.

BBC Internet Correspondent Chris Nuttall: Microsoft's business morality to be questioned

Justice Department lawyers opened their case on Monday by singling out Mr Gates, pointing to what they said were inconsistencies between sworn videotaped evidence and e-mails and memos that Mr Gates had written several years earlier.

Microsoft's legal team maintains the Seattle-based company is fighting for the principle "that every company ought to be able to innovate ... to improve its products in a way that meets the demands of its customers."

The key argument is over the way Microsoft markets its Explorer Internet browser, which it includes free with the Windows 98 operating system.

Illegal deal

Washington Correspondent, Paul Reynolds: "The case is seen as a landmark effort by the government"

The prosecution says Microsoft has used its influence and financial clout to intimidate computer makers and entice other companies to distribute Microsoft's own Internet software over that of Netscape.

Jim Barksdale, chief executive of Netscape Communications, appeared as the trial's first witness on Tuesday afternoon.

But his cross-examination did not reach the central allegation that Microsoft illegally proposed splitting the browser market with Netscape during a June 1995 meeting.

In written testimony released on Monday, Mr Barksdale said that at the time Microsoft executives had made it clear that if Netscape didn't agree, "Microsoft would crush Netscape, using its operating system monopoly."

Windows dominates the operating software market

Under cross-examination on Tuesday, he said when consumers compare the two browsers, most prefer Netscape's:

Microsoft counsel then asked why a growing number are using Explorer: "Because it came with the machine," Mr Barksdale responded.

On Monday prosecution lawyer David Boies told the court: "What you see is a consistent pattern of Microsoft doing this, using its monopoly power, using its leverage, using everything it has."

The federal Justice Department and 20 state governments accuse Microsoft of using its market dominance to try to squeeze out its competition in an attempt to unfairly create a monopoly.

Microsoft operating systems run on more than 90% of the world's computers.

Eight year investigation

Microsoft has made Bill Gates an estimated fortune of over $50 bn

Mr Gates, the richest man in the world, is not expected to testify in court - prosecution attorney Stephen Houck, said his absence showed "a lack of intestinal fortitude."

But Microsoft officials said that after eight years of investigation the government had no proof that the company had tried to stifle competition.

"We didn't hear anything that the government hasn't been saying for weeks or even months," said Mr Neukom after the first day of the trial.

Microsoft spokesman Mark Murray, said the government was "taking two bits of information and trying to weave them together to make these allegations."