Lindows, a company that sells a consumer-oriented Linux-based OS, and Microsoft have ended a three-year copyright infringement battle. Among other provisions of the deal, Lindows will change its name to Linspire and acknowledge that "windows" is not a generic term for OSs, while Microsoft will pay US$20 million—nearly ten times the small company's 2003 revenue.

Incentives to Settle

The companies' legal tussle began in Dec. 2001, when Microsoft sued Lindows for trademark infringement, alleging that the word "Lindows" was too close to "Windows" and might confuse consumers. Before the case reached trial, however, a judge in the United States ruled that a jury should consider whether Microsoft had the right to trademark "Windows" in the first place, and an appeals court agreed. This ruling placed Microsoft's most valuable brand at risk.

Meanwhile, several European judges sided with Microsoft and granted preliminary injunctions preventing Lindows from doing business in Belgium, Finland, Luxembourg, and the Netherlands unless the company changed its name. Microsoft was seeking similar injunctions in Canada and France.

With one of Microsoft's most valuable assets facing an uncertain future, and Lindows facing expensive legal battles on multiple fronts, both sides had considerable incentives to settle the case. An agreement was reached in July 2004.

Microsoft has agreed to do the following:

• Drop all trademark infringement suits and other litigation against Lindows
• Pay Lindows US$15 million by Aug. 15, 2004, and another US$5 million on the receipt of certain domain names in mid-September
• Grant Lindows royalty-free licenses to use certain Windows Media technologies for four years.

Lindows has agreed to do the following:

• Drop all litigation against Microsoft, including counter-claims
• Acknowledge in the text of the settlement that "windows" is not a generic term for OSs
• Change its corporate name to Linspire
• Remove the word "Lindows" from all its products and Web sites
• Transfer 13 domain names (including lindows.org and lindowsfan.com) to Microsoft in Sept. 2004
• Transfer two domain names, lindows.com and lindowsinc.com, to Microsoft by 2008 (Lindows was allowed to keep these domain names longer, for customers who might not remember the new name)
• Stop redistributing certain copyrighted Windows Media technology with its OS.

Linspire is at www.linspire.com.