Microsoft has agreed to pay Linux vendor Lindows $20 million to end the two-and-a-half-year legal battle over the Lindows name, which Microsoft argues is too close to its Windows trademark.

As part of the settlement, Lindows agreed to change its legal name to Linspire by September 14 and cease all use of the Lindows name in its products. The company adopted the Linspire name for most of its products sold globally and its Web site in April after a legal defeat in Europe.

Additionally, Lindows will hand over several Internet domain names it registered, including and However, the company will be allowed to hold on to the and names until July 15, 2008. The names will redirect to the Linspire Web site.

The settlement was reached on Friday. Lindows disclosed details of the agreement in a regulatory filing with the US Securities and Exchange Commission (SEC) on Monday.

Microsoft is pleased that Lindows will now compete in the market under a name that is distinctly its own, said Tom Burt, Microsoft corporate vice president and deputy general counsel.