WinInfo Daily UPDATE, July 20, 2004

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In the News

- Microsoft Settles Lindows Case for $20 Million
- DOJ Scrutinizes Microsoft's Longhorn Plans

==== In the News ====

by Paul Thurrott, [email protected]

Microsoft Settles Lindows Case for $20 Million

Microsoft and Lindows announced yesterday that they have settled Microsoft's trademark-infringement lawsuit against the Linux maker. Microsoft agreed to pay Lindows $20 million, and Lindows agreed to change its corporate name to Linspire by mid-September, turn over any Lindows-related domain names to Microsoft, and cease using the Lindows name. Lindows also will get a royalty-free license to use Microsoft's Windows Media formats for 4 years. Executives from both companies issued statements about the agreement.
"This case was centered on the fundamentals of international trademark law and our necessary efforts to protect the Windows trademark against infringement," Tom Burt, Microsoft's corporate vice president and deputy general counsel, said. "This settlement addresses those concerns, and we are pleased that Lindows will now compete in the marketplace with a name distinctly its own."
"We are pleased to resolve this litigation on terms that make business sense for all parties," Lindows CEO Michael Robertson said. "Over the next few months, Lindows will cease using the term Lindows and transition to Linspire globally as our company name and primary identifier for our operating system product."
Created in July 2001, Lindows is the brainchild of Robertson, who also founded The company clearly chose the Lindows name to rile Microsoft, which owns a trademark on the name Windows. And predictably, Microsoft sued Lindows in December 2001, charging that the Lindows name violated the trademark. But things didn't go well for Microsoft in the US courts; a federal judge questioned the validity of the Windows trademark and set a trial date. Microsoft did, however, win injunctions against Lindows in Europe, and the Linux company had to change its name to Linspire in certain European markets as a result. The company will now use that name worldwide.
Although Lindows has been losing money since its inception, the company hopes that the combination of Microsoft's $20 million payout and an expected $39 million gain from a pending initial public offering (IPO), which Lindows filed yesterday, will help the company move forward. Certainly, the $59 million will be enough money to pay off the company's $13 million debt.

DOJ Scrutinizes Microsoft's Longhorn Plans

The Longhorn release might still be years away, but the OS has already come under the watchful eye of the US Department of Justice (DOJ), which wants to ensure that Microsoft's next major OS conforms to the company's US antitrust settlement terms. A DOJ lawyer informed a federal judge yesterday that the agency would like to have full access to Longhorn as early as possible so that Microsoft won't be able to later represent its feature set as unchangeable because it's been under development for so long. "While Longhorn is not scheduled for release for some time, plaintiffs believe that early attention to these issues will enable plaintiffs and Microsoft to address any potential concerns in a timely manner, before the final structure of the product is locked into place," DOJ regulators and Microsoft said in a joint filing.
Microsoft has delayed Longhorn innumerable times, although the software giant has never publicly announced an expected release date. Recent roadmap information from the company pegs the earliest possible Longhorn release date at mid-2006, however, and internal documentation I've recently viewed confirms that schedule. With at least 2 years to go, Longhorn is still at a phase in which its feature set could change dramatically, and the DOJ clearly wants to review Microsoft's plans before that situation changes.
The DOJ might be in for a nasty surprise, however, because Longhorn will likely contain numerous technologies with which the agency will take exception. The DOJ's original antitrust case centered around Microsoft's practice of harming competition by bundling technology in its dominant Windows OSs. In the wake of the US antitrust case, the company has curiously increased its technology-integration practices, even touting recent releases' "integration innovation." Longhorn will be more of the same--integrated search functionality that seems designed to knock competitors such as Google and Yahoo! out of the search business. Other technologies, such as digital-media integration, security, and virus scanning, could also potentially harm competitors.
DOJ lawyers will meet with Microsoft executives next week at the company's Redmond campus to discuss several matters, including Longhorn. A Microsoft spokesperson said that the company expects to ship Longhorn while its US antitrust settlement is still in place and that it will adhere to the agreement.
In related news, DOJ and Microsoft representatives recently met to discuss the status of Microsoft's compliance with the settlement. According to US District Judge Colleen Kollar-Kotelly, who is overseeing Microsoft's compliance, the company is making satisfactory progress. She also praised Microsoft's decision to extend its technology-licensing program by 2 years.

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