The settlement agreement was announced Thursday by the state of Massachusetts, the lead plaintiff in the case. In addition to the $4.25 million, Sony BMG will also pay up to $175 apiece to consumers whose computers were damaged by the software.
"We're pleased to reach these agreements," Sony BMG said in a statement.
The announcement comes just after the music label announced similar deals with Texas and California. With the settlements, Sony BMG, jointly operated by Sony and Bertelsmann Music Group, has taken a major step in resolving a controversy that caused a public uproar last year.
Sony must still contend with an investigation into the matter by the Federal Trade Commission.
The upheaval over Sony's DRM started in October 2005, when a computer programmer discovered that one of the company's CDs was restricting his computer's ability to copy music.
The programmer had installed Sony software that enabled him to listen to a CD on his computer, but the disc also installed a DRM program that would limit the number of copies he made of the CD and bar him from creating unprotected MP3s. The DRM program also provided a place where malicious software could hide and operate undetected, a feature known as a rootkit.
"If companies want to use technology to protect their interests, they need to be upfront with consumers," said Tom Reilly, the Massachusetts attorney general. Sony must give "consumers the opportunity to make informed choices about buying and using these products."
Under the agreement, Sony BMG is prohibited from using similar DRM software in the future.New York, Florida, Oregon and Pennsylvania were among the states that participated in the settlement.
The 13 states that started the settlement process with Sony BMG will each receive $316,538, while the rest will get $5,000, the Associated Press reported.
California and Texas each receive $750,000 in their settlements reported Wednesday.