Nearly everyone has heard about our litigation with Microsoft, which goes to a jury in December, 2003 in Seattle. (Microsoft sued us claiming they are the only company that can use the word "windows," despite the fact that it has been generically used throughout the industry since long before Microsoft adopted it.) What you haven't heard about is that for quite some time, Lindows.com has been involved in yet another critical legal battle.

After Microsoft filed its trademark infringement complaint, Lindows.com informed our business insurance provider and asked them to help defend us - which is their obligation under the policy we purchased. St. Paul Fire and Marine Insurance Company (NYSE: SPC) refused to defend us in spite of the fact that they willingly took our premiums and knew our company name and business plan from the outset. Worse yet, St. Paul almost immediately filed their own lawsuit against Lindows.com. Now, not only must Lindows.com defend itself against the richest company on the planet, but we had to spend money hiring even more attorneys to defend a lawsuit against someone who is supposed to be on our side! This is not how insurance is supposed to work.

Of course nobody wants to pay for a legal battle with Microsoft, a company known for protracted litigation, but St. Paul's refusal to defend us is dangerous for our small company because it leaves us to bear completely the financial burden of a lawsuit which is now well into seven digits--it's like David trying to fight Goliath without a slingshot. This has required us to spend time and money on attorneys that would have been much better spent on improving our product and company. Even more disconcerting, we have learned that St. Paul has had marketing and business ties to Microsoft in the past. Perhaps this explains St. Paul's immediate refusal to defend us and their tactic of suing their own customer. Time may reveal the truth since Lindows.com has been forced to file a "bad faith" claim against St. Paul to try to get to the bottom of this situation.

In the meantime, Judge Robert Takasugi has just entered summary judgment in favor of Lindows.com. He found in his ruling that St. Paul is liable for breaching their contract and confirmed that they have a duty to defend Lindows.com. This is an important legal victory for Lindows.com because it offers some relief in the financial impact of a lawsuit by a massive corporation like Microsoft. It's still a David vs. Goliath fight, but at least we get to use our slingshot.

-- Michael