Walt Mossberg and Kara Swisher spoke with Microsoft’s Disinterested Figurehead Chairman Bill Gates and CEO Steve Ballmer at this year’s D conference last evening:

AllThingsD’s John Paczkowski provides notes. Here are a few excerpts:

Mossberg: What about Vista and the lousy reception it’s been given. Is Vista a failure?
Ballmer: Vista is not a failure. Is it something we’d like to improve? Of course. Is it something that with 20/20 hindsight we’d do differently? Sure, he confesses. But Vista has sold a lot of copies, he adds.

MacDailyNews Take: To clueless Best Buy shoppers guided by ignorant USA Today articles. They did not choose Vista, they don’t know any better. Most Windows users don’t even know what an OS is, much less choose one. Most Mac users, on the other hand, have tried to use Windows (at work and/or school) and have chosen Macintosh for a reason.

Walt jumps in and asks about the percentage of Vista sales that result in downgrades to XP. Ballmer dodges. Gates looking a little depressed.
Walt asks if Vista has damaged with Windows brand.
Gates says Microsoft’s philosophy is to “do things better.” And Vista has given us lots of opportunity to do that, he notes. (Audience laughter.) There are plenty of lessons out of Vista–compatibility and other issues vendors are concerned about.
Ballmer says that according to consumer research, the No. 1 complaint about Vista was the change to the Windows user interface.

MacDailyNews Take: And so, in their finite wisdom, they’re about to change the upside-down and backwards Mac WIndows user interface again with Windows 7. Read on:

Paczkowski notes, “We’re about to get a Windows 7 demo (Oh, one more thing …. Here’s hoping Microsoft shares only those aspects of the new OS that it doesn’t end up de-featuring at a later date.) Ballmer says what we’re about to see is ‘just a snippet’ of Windows 7.”

Paczkowski writes, “Windows 7, like other Microsoft OS’s before it, seems to have borrowed a thing or two from Mac OS X. This time it’s Apple’s Dock, which Microsoft appears to have borrowed. Multi-touch and a Dock. In Windows. Steve Jobs must be so proud.”

MacDailyNews Take: Some things never change. Unless Apple does. Then everything changes. Microsoft’s OS, the music business, the smartphone and wireless industries…

Microsoft’s Julie Larson-Green conducts the WIndows 7 demo. Paczkowski notes, “Larson-Green pulls up a brand new app, “Touchable Paint.” She uses all 10 fingers to draw a tree. Then, she brings up a photo gallery. Noting that multi-touch makes it faster and easier to manipulate photos, she demonstrates … well, she demonstrates a lot of features that anyone who’s ever used an iPhone will already be familiar with: two-finger zoom, flicking through a slideshow, single finger panning through thumbnails… Walt asks if multi-touch is built throughout the OS. Larson-Green says it is.”

Walt asks Ballmer if he’s worried about the next iteration of Mac OS X, which will likely be released before Windows 7. Is there a risk that the work you’re doing now with multi-touch will look dated when Apple (AAPL) releases its next OS?
Ballmer says he’s confident Microsoft will have fantastic Windows 7 PCs, regardless of what Apple’s got on the market.

Walt presses him, noting Apple’s recent growth in the PC market.
Ballmer notes the difference in scale between the two companies: “We sell 270 millions PCs a year, and Apple sells 10 million. They’re fantastically successful, and so are we.”

MacDailyNews Take: Microsoft sells zero (0) PCs a year. Apple sells 10 million more personal computers per year than Microsoft. Apple created the personal computer as we know it today. Microsoft copied/stole it. If you want to count faulty, Red Ring of Death, sound-like-a-hurricane-in-your-living-room Xboxes as “Microsoft PCs,” you’re desperately grasping at straws. Please stop reading now and head on over to Dell.com to begin configuring your next POS.

Walt hits on Windows quality issue, noting that he’s seen old Macs running significantly faster than new Vista machines.
Ballmer admits there’s room for improvement: Steve Jobs has a great business, he says. His model works well. But so does ours. 10 million people like his model. 290 million like ours.

MacDailyNews Take: 290? We thought it was 270? In less than 5 minutes, Balmy sold 20 million more nonexistent PCs in his mind. Anyway, most of those 290 million never made a choice because they have no idea there even is a choice. They were stuck with Windows at work or school and therefore consigned themselves to Windows PC purgatory because “that’s what they use at work/school.” Fortunately thousands of people awaken with each passing day. Of the now 300 million total, about 10 million people per year have used both; they choose Macs for a reason. And, by the way, the installed base for Mac OS X is approximately 25 million users, not the 10 million Ballmer is trying to insinuate (notice that he dropped the “per year?” We did.) 25 million users LOVE Steve Jobs’ model, the rest don’t know any better.

Kara asks Gates how it feels to have Microsoft defined by Apple via its “I’m a Mac, I’m a PC” campaign.
Gates clearly isn’t happy with that question. Dodges. Ballmer jumps in. Hits that 290 million metric again. “Every share point Apple picks up is a share point we don’t like. But we like selling 290 million units.”

MacDailyNews Take: Ballmer’s delusional. Microsoft sells zero (0) PCs a year. Most Mac users have made conscious technology choice and are therefore better informed than the vast majority of Windows sufferers.

Much more in the full article, including a video of the Windows 7 demo and photos of Kermit and Monkey Boy on stage with Mossberg and Swisher here.

MacDailyNews Take: To find out which of the cool iPhone features has been patented by Apple and are now protected from replication and which ones you can expect to be copied soon by the likes of Nokia, Samsung or Motorola, we’ve combed through the U.S. Patent and Trademark database and checked all relevant Apple’s patents.

And we came to a conclusion that this time Steve Jobs did his homework and most of the key features that make iPhone an iPhone will not be easily copied by competitors. This applies to Multi touch display, the idea to use full screen of the device for User Interface, scrolling, zooming and other finger gestures, soft on screen controls, multifunctionality, proximity, ambient light sensors and many other functions.

When Steve Jobs exclaimed [in front of a slide displaying "200+ patents" during Macworld Expo 2007's iPhone-dominated] keynote, “And boy have we patented it!” it was not an empty boast. The have indeed PATENTED it. And though not all of the claims have received patent protection yet and even less of them may withstand scrutiny in court if Apple decides to enforce them, many of the claims should should stick.Unwired View, May 2007