Sony BMG has managed to settle one of the class action lawsuits resulting from its inclusion of DRM technology based on rootkits with some of its music CDs. 

Under the terms of the settlement Sony will exchange CDs loaded with the rootkit for DRM-free discs. Customers will also be offered a $7.50 cash payment and one free album download, or no cash and three album downloads.

The company will try and make iTunes one of the services that will allow the album downloads, but this has not been confirmed.

The lawsuit was filed in US District Court for the Southern District of New York in November by James Michaelson, who found his computer infected with the rootkit after he purchased a Neil Diamond CD. 

Sony has now withdrawn all the discs containing DRM software and has assured customers that no personal information was collected about their listening habits. It will also provide an application that removes the offending software.

But this is not the end of the road for Sony's legal problems. It still has a case to settle in Texas, and the Electronic Frontier Foundation has also launched a class action suit.