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The US lawsuit was brought over suggestions that Creative made misleading claims for the storage capacity of its hard disk player products.

The company calculated the capacity using base 10 notation, where a gigabyte is composed of a round billion bytes, rather than base 2 where a gigabyte is 1,073,741,824 bytes. This meant that the claimed storage capacity was not actually available for use by the customer.

The settlement offers compensation to all US customers who bought a hard disk player

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in the last seven years in the form of a discount on a replacement product. Those accepting the offer will do so on the condition that they give up their right to sue the company.

"As part of the settlement, Creative will make certain disclosures regarding the storage capacity of its hard disk drive MP3 players. In addition, if you submit a valid claim, you will receive either a 50% discount off the price of a new 1GB MP3 player, or a discount certificate good for 20% off the price of any single item," says a summary of the settlement released by Creative.

So far no such claim has been brought against the company in the UK, although a similar claim has been made in the US against Seagate. That claim was also settled out of court.

Many major hard disk manufacturers use base 10 notation to calculate storage capacities, and if legal precedent was set that this is misleading it could cost hardware manufacturers dearly.

Creative was unavailable for comment at the time of writing.