Colwel Platinum Entertainment sued Lambert last year after he blocked the sale of Beg For Mercy, arguing that it owned a 50% publishing share of the recordings and had an unconditional right to promote and sell them.
The company said that they spent $200,000 on producing recordings with Lambert throughout 2007 and 2008, and argued that by sending a take-down notice to Amazon.com, the singer had made false claims under the Digital Millennium Copyright Act.
However, Colwel has now confirmed that the lawsuit was dismissed with prejudice in return for Lambert's assurance that he will allow Beg For Mercy to be released.
"The Colwel Platinum Entertainment lawsuit against Adam Lambert has been resolved," a statement from the label reads. "Adam has withdrawn any objections to the release of Beg For Mercy and he has approved the use of his songs and performances in these pre-Idol recordings which are interpretations of his artistic vision at the time."
The release also addressed suggestions that emerged during the lawsuit that Lambert violated the rules of American Idol by auditioning while under contract.
"Neither Colwel Platinum Entertainment, Inc. nor [record producer] Malcolm Welsford ever stated that Adam was not eligible to participate in American Idol when he did so and regret that the lawsuit's allegations were misinterpreted," the firm said.
> Adam Lambert delays new album 'Trespassing' release
Watch Adam Lambert in the video for 'Better Than I Know Myself' below: