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Lindows’ fortunes in its trademark battle with Microsoft took a new turn May 27 in Europe, when the Amsterdam District Court denied Microsoft’s request for an injunction to keep Lindows from selling its products in the region.

The Dutch court—which also ordered Microsoft Corp. to pay 944 euros to Lindows Inc. for its legal fees—agreed with Lindows Inc. that not every use of the trade name Lindows infringes on Microsoft’s “windows” trademark.

Click here to read about Lindows’ recent U.S. win concerning the term “windows.”

According to the ruling, Lindows can continue to use the name Lindows on a limited basis, so long as it accompanies it with the additional phrase that Lindows is not affiliated with “windows” in any way.

“This victory is quite a turnaround because Microsoft had asked for a daily fine of 100,000 euros to be levied against us, and instead they are the ones required to pay,” Lindows CEO Michael Robertson said in a statement. “We hope Microsoft can move past these legal tactics and learn to compete in the marketplace rather than in the courtroom.”

In practical terms, the ruling enables Lindows to resume sales of its operating system in the Benelux countries: Belgium, the Netherlands and Luxembourg. According to Lindows, residents can immediately order Linspire products. Benelux resellers plan to resume sales in late June.

Read more here about an Amsterdam court’s previous preliminary injunction that forbid Lindows from selling its OS in the Benelux countries.

To re-energize desktop Linux in the region, Lindows is making its latest version of Linspire—the new name of its product and Web site—available for free via BitTorrent for a limited time using the coupon code “free4benelux.”

Glenn Peterson, an intellectual property attorney and shareholder with the Sacramento-based law firm McDonough Holland & Allen PC, said he thinks this is a significant victory for the small San Diego, Calif.-based Linux vendor.

Peterson said he thinks the Dutch court found that “Microsoft was clearly overreaching here. Being the 800-pound gorilla in the marketplace is one thing, but bringing the gorilla to court is a bad idea. Microsoft should have caught on to that by now.”

“[Microsoft’s] motion would probably have been labeled ‘frivolous’ in any U.S. court,” Peterson said. “In Amsterdam, it was politely dismissed.’”

Peterson said the question before the Amsterdam court was whether the injunction—precluding use of ‘Lindows’ as a product trademark in the Benelux countries—also precluded using ‘Lindows Inc.’ as the name of the company there. “The court answered in the negative and soundly rejected Microsoft’s claim,” he said.

Next Page: The court outlines its reasoning for the ruling.

While noting that Lindows has a legitimate interest in using its company name in manuals, licenses and other legal documents, the court also noted that use of “Lindows” was still legal outside the Benelux countries and that Lindows was cautious to ensure that use of the name inside the Benelux was limited and accompanied by a disclaimer.

The court ruled that such use “neither contravenes the judgment nor the settlement agreement,” since “use” in the context of the agreement “can only be interpreted as infringing use.”

“Awarding Microsoft’s claim would have the factual consequence that Lindows would need to adapt its [company] name also outside the Benelux, which, under the present circumstances, it is not obliged to do,” the court ruled.

The court also decided that the limited use of “Lindows” as a company name “does nothing to take unfair advantage of, or cause detriment to, the distinctive character or reputation Microsoft’s trademarks.”

As part of Lindows’ and Microsoft’s settlement agreement after Microsoft’s first Amsterdam lawsuit, “Lindows and Microsoft agreed that Lindows would not use ‘Lindows’ or anything too similar as a trademark or as part of its software marketing/packaging materials within the Benelux region,” Peterson said.

Lindows is preparing for an IPO. Click here to read more.

“Lindows also agreed to block its Web site against visitors from the Benelux and to make its Lindows software products unavailable for purchase there. Lindows then changed the name of its Benelux products and Web site to ‘Linspire,’” he said.

“However, in the small print on its Web site pages and inside its product packaging, manuals and license agreements, Lindows uses the name of its company: ‘Lindows Inc.’

“And even though a Web site visitor or product consumer would never see the company name until after the Web page or product package was opened, Lindows went even further to clarify that it has no affiliation with Microsoft,” Peterson said.

The Amsterdam court observed, “In every instance, the trade name [i.e., company name] is supplemented by the following phrase: ‘Lindows Inc. is not endorsed by or affiliated with Microsoft Corp. in any way.’”

Despite this added text, Peterson said, “Microsoft filed a motion claiming that Lindows was violating the judgment and the settlement agreement by including its company name in the small print of its manuals and license agreements, albeit with a disclaimer of affiliation with Microsoft.

“Microsoft further claimed that Lindows is ‘benefiting unjustifiably from the reputation of the Windows brands’ and should be immediately enjoined from including its company name on any materials distributed in Benelux.

Microsoft did not return calls asking for comment.

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