The settlement, reached on Friday, ends a series of trademark infringement lawsuits that Microsoft had brought against Lindows in which it alleged that the Lindows name was too similar to Microsofts Windows trademark.
The two companies announced on Monday that Lindows will change its company name and the name of its Linux-based operating system to Linspire. Lindows previously had changed the name of its OS internationally following initial court rulings against it in the Benelux and other European countries.
The companies said that the terms of the settlement were confidential, but a Lindows filing with the Securities and Exchange Commission stated that Microsoft will make two payments to Lindows totaling $20 million.
Lindows previously had filed the paperwork for an initial public offering, and on Monday filed an amended S-1 filing. It intends to issue 4.4 million shares at between $9 and $11 a share, which could raise as much as $48.4 million.
Microsoft agreed to pay $15 million by Aug. 15, and then make a second payment for $5 million by Feb. 1, 2005, in exchange for Lindows handing over a set of "Lindows" domain names to Microsoft, according to the filing.
Microsoft also agreed to grant Lindows a limited, four-year license to unspecified Windows Media components, which Lindows intends to include in its newly renamed Linspire operating system, the filing stated.
Microsoft officials, in a statement, said that the settlement addresses the Redmond Wash., companys concerns about its Windows trademark.
"We are pleased that Lindows will now compete in the marketplace with a name distinctly its own," said Tom Burt, Microsofts corporate vice president and deputy general counsel, in a statement.
While having some luck against Lindows in Europe, Microsoft faced snags in the United States. In February, a federal court ruled that a jury would consider historical uses of "windows" in user interfaces beyond its use in Microsofts operating system.