According to the settlement, Microsoft will pay Lindows $20 million and Lindows will forgo the 'Lindows' name entirely, adopting instead the Linspire name that it had been using in Europe. The company will also withdraw its trade mark applications in respect of Lindows.
The dispute dates back to December 2001 when Microsoft filed a trade mark suit in the US seeking to prevent Lindows Inc. from using the terms LindowsOS and Lindows.com, arguing that they infringe on its rights in Windows.
Microsoft then raised further actions in Europe, winning preliminary injunctions against Lindows in Finland, Sweden and the Benelux countries. As a result, Lindows changed the name of its operating system from Lindows to Linspire in April.
But the main action, in the US, has not gone entirely Microsoft's way. A US court refused to allow Microsoft to appeal a decision that the meaning of the term 'windows' must be considered as it was understood prior to 1985 – before Microsoft's Windows was first released.
The interpretation of 'windows' was fundamental to Microsoft's case because if a trial jury found that the term 'windows' was generic prior to 1985, then it could not now or in the future be trade marked by Microsoft.
This appears to have been too high a risk to take, and yesterday the software companies announced that they had agreed terms of settlement.
"This case was centred on the fundamentals of international trade mark law and our necessary efforts to protect the Windows trade mark against infringement," said Tom Burt, corporate vice president and deputy general counsel for Microsoft. "This settlement addresses those concerns, and we are pleased that Lindows will now compete in the marketplace with a name distinctly its own."
"We are pleased to resolve this litigation on terms that make business sense for all parties," said Michael Robertson, CEO of Lindows. "Over the next few months Lindows will cease using the term Lindows and transition to Linspire globally as our company name and primary identifier for our operating system product."
Details of the settlement are confidential, but a copy of the settlement agreement has been filed with the US Securities and Exchange Commission, as part of Lindows' recently announced floatation disclosures.