A copyright dispute between the Associated Press and artist Shepard Fairey over a photograph he used to create the iconic Obama Hope poster has been settled "in principle", the parties announced this week.

According to a statement published on both the AP website and Fairey's Obey Giant website, both parties say they have agreed that "neither side surrenders its view of the law".

"Mr Fairey has agreed that he will not use another AP photo in his work without obtaining a license from the AP," the release says.

"The two sides have also agreed to work together going forward with the Hope image and share the rights to make the posters and merchandise bearing the Hope image and to collaborate on a series of images that Fairey will create based on AP photographs."

Financial terms included in the agreement have not been disclosed.

The dispute began in 2009 when the AP claimed it was owed credit and compensation for Fairey's use of the image. Fairy then sued the AP, seeking a declaration that his use of the image constituted a fair use under copyright law.

"The Associated Press is pleased to have reached resolution of its lawsuit with Mr. Fairey," Tom Curley, president and CEO of AP said in the release.

"AP will continue to celebrate the outstanding work of its award-winning photographers and use revenue from the licensing of those photos to support its mission as the essential provider of news and photography from around the world. The AP will continue to vigilantly protect its copyrighted photographs against wholesale copying and commercialization where there is no legitimate basis for asserting fair use."

"I am pleased to have resolved the dispute with the Associated Press," Fairey adds. "I respect the work of photographers, as well as recognize the need to preserve opportunities for other artists to make fair use of photographic images. I often collaborate with photographers in my work, and I look forward to working with photos provided by the AP’s talented photographers."

According to the release legal action against Obey Clothing by AP in relation to use of the image on clothing is still ongoing.

In August last year a dispute over copyright of the image between the Associated Press and freelance photographer Mannie Garcia ended after both parties dropped their claims.

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