SEATTLE -- Microsoft Corp., the world's largest software maker, will pay $20 million to Lindows Inc. to settle a dispute over the use of the company's name, which Microsoft said was too similar to its Windows trademark.
Microsoft will gain rights to Lindows.com and other Internet domain names, and Lindows will change its name to Linspire, Lindows said in a filing with the Securities and Exchange Commission. Microsoft sued Lindows in December 2001, alleging that the use of ''Lindows" violated its Windows trademark.
The case raised the possibility that Redmond, Wash.-based Microsoft could lose rights to the Windows trademark.
A US judge had questioned the validity of the trademark and said a determination could be based on how the term Windows was used 20 years ago, a tough standard for Microsoft to prove.
''It's a smart move," said Rob Helm, the director of research at Directions on Microsoft, a Kirkland, Wash., market research firm.
''It preserves the principle that Microsoft owns the term Windows and avoids the legal precedent that might make Microsoft's most important trademark public domain."
Microsoft's Windows operating system runs 95 percent of the world's personal computers.
As part of the settlement, San Diego-based Lindows acknowledged the validity of the trademark and Microsoft's ownership of it.
Lindows said it will change its name to Linspire by Sept. 14 and stop using the Lindows name.