Gates is testifying in a $1 billion antitrust lawsuit accusing the software maker of duping Novell into thinking it would include that company's WordPerfect writing program in Windows 95.
Gates says that by 1994, WordPerfect's share of the market was already declining, while Microsoft's own Word program was gaining ground.
Novell claims it was tricked and later had to sell WordPerfect for a $1.2 billion loss.
Gates is Microsoft's first witness Monday in the federal trial in Salt Lake City that started a month ago.
Microsoft lawyers say Novell's claims are groundless. They have sought a dismissal.