Sony BMG Music Entertainment has reached a tentative settlement with consumers who filed a class action lawsuit over the music company's copy-protection software on CDs, court papers show.

The lawsuit against Sony BMG, a joint venture of Japan's Sony Corp (SNE) and Germany's Bertelsmann AG (BERT.UL), stems from its use of controversial technology aimed at thwarting illegal copying of music on CDs.

Consumers complained that the technology — known as XCP — violated their rights by potentially leaving computers vulnerable to hackers and allowing the company to track listening habits.

The CDs with the XCP and MediaMax antipiracy software featured music from 52 popular artists including Ray Charles, Frank Sinatra, Louis Armstrong and Celine Dion.

Under the proposed settlement, which still must be approved by a federal judge in New York, consumers would be allowed to exchange the CDs for new ones without the copy-protection technology.

Sony BMG would also have to provide software to uninstall the technology and stop making CDs with XCP on them, according to court documents filed on Wednesday.

The settlement would entitle people who bought the CDs with the copy protection to a cash payment of $7.50 and one album download from a list of more than 200 titles. Alternatively, they could download three albums from the list.

A separate lawsuit was filed in November by the Texas attorney general against Sony BMG Music Entertainment accusing it of violating the state's laws on deceptive trade practices by hiding the "spyware" on its CDs.