updated 2/11/2005 10:19:59 AM ET 2005-02-11T15:19:59

The Sharper Image has agreed to pay the publisher of Consumer Reports $525,000 to cover the amount the magazine spent in successfully defending itself against the specialty retailer’s libel lawsuit.

The settlement announced Thursday comes three months after a federal judge here tossed a lawsuit alleging the magazine printed false and malicious articles in 2002 and 2003 about the company’s Ionic Breeze Quadra Silent Air Purifier.

Consumers Union has stood by its magazine’s reports, which said its tests of the heavily advertised machine “found almost no measurable reduction in airborne particles.”

In throwing out the case, federal judge Maxine Chesney said Consumer Reports was exercising free speech and that “Sharper Image has not demonstrated a reasonable probability that any of the challenged statements were false.”

Sharper Image appealed to the 9th U.S. Circuit Court of Appeals, but withdrew the challenge and agreed to end the case. Under a California law, defendants of First Amendment speech lawsuits who prevail are entitled to legal fees and costs.

“The message is clear. If you file a meritless lawsuit just because you want to silence a fair, honest review by Consumer Reports, you’ll pay,” said Jim Guest, president of Consumers Union, the Yonkers, N.Y.-based publisher.

More than 2 million of the $350 units have been sold.

E. Robert Wallach, Sharper Image’s attorney, said the articles were misleading, but the San Francisco-based company decided to end the case because the purifiers are selling well.

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