The settlement, announced Tuesday, concludes more than two years of courtroom wrestling over the legality of 321's DVD-copying software, which ultimately led federal judges in New York and California to.
On Friday,, saying the succession of court decisions had forced it to stop selling or supporting its products.
The St. Louis-based company had cast itself as a test case of controversial provisions in copyright law that make it illegal to distribute software that breaks through digital copy protections.
321 claimed that its Copy Plus software made lower-quality DVD copies for people to back up their movie collections. However, most commercial DVDs come wrapped in a copy protection mechanism that prevents that kind of backup.
In a, 321 filed a lawsuit in April 2002, asking the court to declare its software acceptable under the Digital Millennium Copyright Act (DMCA).
However, the studiosin December 2002, after the company released its DVD X Copy software, which makes exact duplicates of DVDs.
The MPAA heralded Tuesday's settlement as a victory in its fight against digital piracy.
"321 Studios built its business on the flawed premise that it could profit from violating the motion picture studios' copyrights. The courts have been amply clear: There is no leniency for violating federal copyright laws,", chief executive of the MPAA, said in a statement.
CNET News.com's John Borland contributed to this report.