The Hobbit and its companion film have been cleared to go ahead after New Line settled its legal wrangle with UK charity The Tolkien Trust and HarperCollins Publishers over proceeds relating to The Lord Of The Rings trilogy.

Alan Horn, president and COO of New Line parent company Warner Bros, said he was “pleased to have put this litigation behind us” after the parties agreed to an undisclosed settlement.

Trustees of the JRR Tolkien Estate and HarperCollins Publishers sued New Line in February 2008 over profit participation, citing a 1969 contract as grounds for a 7.5% share of gross receipts from the films and related products.

Commenting on the settlement, Christopher Tolkien said: “The trustees regret that legal action was necessary, but are glad that this dispute has been settled on satisfactory terms that will allow the Tolkien Trust properly to pursue its charitable objectives. The trustees acknowledge that New Line may now proceed with its proposed films of The Hobbit.”

“We deeply value the contributions of the Tolkien novels to the success of our films and are pleased to have put this litigation behind us,” Horn said. “We all look forward to a mutually productive and beneficial relationship in the future.”

The case had been set for an October 19 trial date in Los Angeles. Guillermo Del Toro is set to begin production on The Hobbit films next year.