Microsoft to Pay Lindows $20 Million

Microsoft Corp. has settled all of its trademark infringement suits against Lindows Inc. with a $20-million payment to the Linux operating system upstart, which agreed to change its name to Linspire.

Details of the settlement, reached Friday, were disclosed in documents Lindows filed Monday with the Securities and Exchange Commission as part of plans for an initial public offering.

In a statement, the companies said the settlement ended a spate of litigation in the United States and abroad.

“We are pleased that Lindows will now compete in the marketplace with a name distinctly its own,” said Tom Burt, Microsoft’s deputy general counsel.

Lindows Chief Executive Michael Robertson said the terms “make business sense for all parties.”

Microsoft, based in Redmond, Wash., sued San Diego-based Lindows in 2001 in U.S. District Court in Seattle, alleging the name infringed its trademark for the ubiquitous Windows operating system. Microsoft then filed similar complaints in Europe and Canada. It won preliminary injunctions in the Netherlands, Finland and Sweden, before quietly settling the Dutch case.

In addition to the U.S. litigation, cases were pending in France, Spain and Canada.

In April, Lindows changed the name of its products to Linspire after U.S. District Judge John Coughenour refused to halt the trademark infringement cases outside the United States.

But the company had until now stuck with Lindows as a corporate name.

Lindows makes a computer operating system that competes with Windows but is based on the Linux operating system.

Proponents of Linux and other open-source technology say it is cheaper and can be more secure, in part because the underlying software blueprints and any improvements are freely shared.

Microsoft tightly guards the proprietary blueprints for Windows.

Under the settlement, Lindows has 60 days to stop using the Lindows name on its products.

Microsoft will pay Lindows $15 million in the next 30 days. The remaining $5 million will be paid out once Lindows transfers control of most of the Lindows-related website names over to Microsoft. That must be done by Jan. 25.

Lindows has four years to continue using two of its Web addresses -- www.lindows.com and www.lindowsinc.com -- but only to redirect visitors to its new websites. After the four years have passed, those sites will also be transferred to Microsoft.

Lindows said the cash settlement and the public offering could help eliminate concerns that it would not be able to stay afloat, but it noted that it still expected to have significant losses over the next several years.

Shares of Microsoft rose 47 cents to $27.95 on Nasdaq.