1:18 PM PST 12/21/2012 by Eriq Gardner, The Hollywood Reporter

Deal comes after judge refused to allow Paramount's "Godfather" contract to be canceled.

Paramount Pictures and the Mario Puzo estate have settled a legal war over a new Mario Puzo estate. On Thursday, the parties told the court about a deal and stipulated to the dismissal of the litigation.

Mario Puzo Estate Wants To Cancel 'The Godfather' Contract with Paramount in Countersuit

Terms of the agreement have not been made public, but it resolves both a claim and counterclaim that were lodged this year in New York federal court. Both sides have agreed to bear their own legal costs.

Paramount sued first in February, alleging that it had a copyright interest in Puzo's famed novel The Godfather, and an agreement that granted "the sole and exclusive right to make and cause to be made literary and dramatic and other versions and adaptations of every kind and character."

The studio had alleged that prior "sequel novels" had tarnished the legacy over the Godfather franchise and that it was promised in writing that there would be no more literary sequels. It wanted confirmation to preclude the release of The Family Corleone, which was to detail Vito Corleone's rise to power in Depression-era New York.

In March, the Puzo estate led by attorney Bert Fields responded with its own counterclaims that alleged that Paramount's actions had meant it breached a 1967 rights agreement that purportedly expressly excluded and reserved "book publishing rights" for Puzo, who died in 1999.

As a result of the alleged breach, the Puzo estate sought to terminate Paramount's rights to The Godfather.

In May, the two sides came to an interim deal to allow The Family Corleone to come out. Money from the book was to be put aside in escrow until the parties reached a conclusion to the litigation.

Paramount scored a big win in the case in September when a federal judge in New York dismissed much of the counterclaims, finding the Puzo estate couldn't cancel the contract, nor can it make a rescission. The judge said that assuming Paramount had an obligation not to interfere with book publishing, the estate had failed to adequately establish this obligation goes to the "essence" of the 1969 agreement.

The judge allowed a breach of contract counterclaim to continue, and a trial could have clarified rights under deals made in the 1960s, but the two sides have now put the dispute to sleep.

Paramount was represented by Richard Kendall at Kendall Brill & Klieger.