The settlement was reached Monday, a few weeks before trial was set to begin on the band's claims of fraud, violation of publicity rights, and breach of contract.
Terms of the settlement were not disclosed.
The band's attorney, Bert Deixler, declined comment. Michael Zeller, an attorney for Activision, did not immediately return a phone message.
The band sued Activision Publishing Inc. over a feature in the game that allows players to perform the songs of other artists using the likenesses of No Doubt front woman Gwen Stefani and other band members.
Activision had denied all wrongdoing and argued the idea of "unlocking" unadvertised features of a video game has been around since the early days of the industry.
The game debuted in November 2009 and was a spinoff of Activision's popular "Guitar Hero" game series.
No Doubt's lawsuit was filed after the release of "Band Hero" and claimed it turned the group into a "virtual karaoke circus act."
The case cited instances in which players could use Stefani's avatar to perform suggestive lyrics from the Rolling Stones' hit "Honky Tonk Women," or have a virtual version of bassist Tony Kanal sing his band's hit "Just a Girl" in Stefani's voice.
Copyright 2012 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.
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