Nearly a year after Facebook filed suit against German social networking service StudiVZ for copyright infringement, the two companies have reached a settlement out of court. As part of the agreement, Facebook will receive an undisclosed financial settlement, all claims have been withdrawn in US and German courts, and both companies can continue operating their services as they are today. The companies say no further details about the settlement will be released.

In the suit, Facebook basically alleged StudiVZ of blatantly copying its features and design by “replacing Facebook’s blue colour scheme with a red one,” and said it was “seeking to end StudiVZ’s illegal activity to ensure that users are not confused and that Facebook’s reputation remains unharmed.” There were since rumors that Facebook was negotiating to buy StudiVZ from its new owner, the Holtzbrinck Grouppe, but Holtzbrinck wanted more money than Facebook was willing to pay, so those negotiations fell through.

However, it appears that Holtzbrinck may have bigger problems on its hands than legal action from Facebook itself: many German users are making the transition to Facebook on their own volition.

Today, Facebook has 4 million monthly active users in Germany, up from 2.9 million just 90 days ago, compared to the reported 5.5 million users StudiVZ has across three of its social networking sites: StudiVZ for university students, schuelerVZ for high school students, and meinVZ for the greater population. In addition, we’ve heard from German users that StudiVZ has been quite stagnant since the Holtzbrinck acquisition.

Nevertheless, Facebook will now be collecting settlement payments from StudiVZ as well. If StudiVZ wants to hold onto its lead for much longer, it’s going to need to do some serious innovation, as users appear to be moving to Facebook in droves.