After a three-year court battle with Linux-based desktop provider Lindows, Microsoft has agreed to pay an initial $15m within a month, according to SEC filings made by Lindows yesterday.

The Linux firm has agreed to complete its name change to Linspire by 14 September under the deal. It began using the name Linspire in April for its website and software except in some cases in the US.

Lindows will also receive another $5m from Microsoft by February 2005 in exchange for handing over undisclosed domain names and a four-year royalty-free licence to certain Windows Media components, according to the filings.

The initial settlement is around 10 times Linspire's accrued legal costs since 2002 of about $1.5m, although outstanding insurance claims could reduce this figure.

Microsoft initially brought the case, claiming that the name Lindows was too close to its Windows trademark. It sued the firm in Europe and elsewhere in the world. The case hinged on whether the term 'windows' was generic.

"We are pleased to resolve this litigation on terms that make business sense for all parties," said Michael Robertson, chief executive at Linspire, in a statement.

"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."

Microsoft deputy general counsel Tom Burt added in a statement: "We are pleased that Lindows will now compete in the marketplace with a name distinctly its own."