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Sun recently filed a lawsuit against Microsoft for more than $1bn (£696m) in damages.
Schwartz appeared as a witness for the nine non-settling states, and said that Microsoft is threatening to transfer its Windows monopoly from the PC operating system to a new middleware layer on which Web services applications will be written.
Sun's fear is that Microsoft will use its .net initiative to capture a larger share of the server market. Sun's Web services platform, the Sun Open Net Environment, competes with Microsoft.
A key issue for Microsoft trial Judge Colleen Kollar-Kotelly to resolve is whether emerging areas, such as Web services, can be included in the broader remedy sought by the states that refused to sign the Bush administration-led settlement in favour of seeking tougher remedies.
Kollar-Kotelly said that drafting an antitrust decree by necessity "involves predictions and assumptions concerning future economic and business events", citing a previous supreme court antitrust decision.
Microsoft argued that it is not covered under the monopoly maintenance violations cited by the appeals court. However, the judge, while not officially ruling on that argument, allowed Schwartz to testify on the subject.
Schwartz is the 13th witness for the states in a remedy phase that is now in its fourth week and is unlikely to conclude until sometime in next month.
Web services are a "substantial, viable threat to Windows," said Schwartz in his written testimony. If most applications are delivered as Web services, and developers write directly to a services platform, "instead of standalone PC applications, the applications barrier protecting Windows could be substantially eroded", he said.
Web services reside and run on servers that can be accessed with a variety of client devices. Schwartz said that, as a result: "Consumers will not be required to purchase Microsoft's desktop operating system in order to run the applications they desire."
He argued that the Bush administration settlement "does not restrict Microsoft's ability to impede competitive Web services and Web service platforms".
Microsoft attorney Steven Holley pursued a line of questions intended to refute Sun's claim that Microsoft's Web services are a threat to Sun and that sun itself had declined to participate in standards work and interoperability testing involving Sun's Java technology.
Microsoft spokesman Jim Desler said: "Sun claims Web services are, somehow, a threat to Microsoft yet, as we will bring out in cross-examination, most would acknowledge Microsoft has been a clear leader in Web services and helped pioneer the concept.
"In contrast, Sun has downplayed the impact of Web services and has declined to participate in Web services standards work and interoperability testing. It continues to promote competitive approaches to Web services," he said in a statement.