XM Satellite Radio Holdings Inc said on Monday it had reached a deal with Universal Music Group which will see the latter drop the patent infringement suit filed against XM last year over Inno.

Reuters reports that XM and Universal Music have settled the patent lawsuit filed in May 2006. XM said Monday it reached a multiyear deal with Universal, which will withdraw from the complaint, and that it hopes to reach deals with the other music companies as well.

The core of the problem is XM’s portable “Inno” device, which is capable of recording and storing music from satellite radio. Universal Music sued XM claiming that its device amounted to digital downloading, infringing copyrights.

Universal was not alone; Warner Music Group Corp, EMI Group Plc and Sony BMG sued XM on the same basis.

The satellite radio said Monday that the pact covers all XM radios with advanced recording functions, including future products, according to Reuters. XM did not give the financial terms.

Last May, when the conflict broke out between the two sides, XM argued that the music stored on Inno cannot be moved elsewhere and that in addition, customers are encouraged to acquire music they desire through the XM + Napster service. XM also argued that the music only lasts as long as a customer is a subscriber.

The satellite radio emphasized that its product is legal and that the law has permitted consumers to listen to and record radio for decades.

Universal Music stated that Inno resembles a download service such as Apple’s iTunes. The company said XM Satellite made “massive wholesale infringement” possible and asked $150,000 in damages for every song copied by XM customers using the Inno.

A year and a half later, an agreement has been reached.

“We look forward to continuing our discussions with the other music companies in hopes of arriving at a resolution that benefits everyone, especially consumers,” XM said in a statement Monday.

Warner Music, EMI and Sony BMG, a joint venture between Sony Corp and Bertelsmann AG, all declined comment, according to Reuters.