Record label Sony BMG will compensate customers in California whose computers were damaged by anti-piracy software on CDs sold by the firm.
Celine Dion was one of the artists affected by the CD debacle
It settles a long-running lawsuit between Sony BMG and a number of US states about the nature of digital rights management software on CDs.
The episode caused a great deal of embarrassment for the world's second largest record label.
Agreements with other states are expected to follow.
As part of the settlement agreed this week, Sony BMG will provide refunds of up to $175 (£89) to customers in California who can provide a description and documentation of damage to their computers from the software.
The record company will also pay £380,000 in penalties and costs to settle the case which saw it accused of using false advertising, unfair competition and unlawful computer intrusion.
"To their credit, they did stop the practice as soon as we brought it to their attention," said Tom Papageorge, a head deputy district attorney for Los Angeles County.
It November 2005 Sony was first accused of using the same techniques as virus writers to stop its CDs being illegally copied.
Software developer Mark Russinovich found that the XCP anti-piracy software used by Sony employed virus-like techniques to hide itself on PCs.
This cloaking technology, he said, could be exploited by hackers. Following the reports, several lawsuits were taken out against the record label
In all, millions of CDs are thought to have been sold that use the controversial programs. All the affected CDs were only sold in North America.
Aggrieved customers were compensated in a variety of ways, including replacement discs free of anti-piracy software, cash and free downloads of Sony albums.