The Hollywood actor-turned-politician had in April filed a case in the Los Angeles Superior Court against the small toy firm asking it to stop the production of the $19.95 plastic bobblehead doll that featured Schwarzenegger attired in a grey business suit and a bandolier and carrying an assault rifle.
Martin Singer, the California governor's company -- Oak Productions Inc's lawyer -- contended that the toy company illegally expropriated Schwarzenegger's image for private profit and sought an injunction in a Los Angeles court. He claimed violations of copyright and intellectual property law, saying the doll was being made and sold without his consent, the NYT reported.
The owners of Ohio Discount Merchandise, Todd and Toby Bosley, replied that the doll was protected under the First Amendment rights of political commentary. Under terms of the settlement, the Bosleys have withdrawn the Schwarzenegger doll from the market but will have the right to produce a new doll, minus the armament, in the future.
The toy makers agreed to donate part of sales of both dolls to Schwarzenegger's charity, an after-school sports programe called Arnold's All Stars.
"We're very happy with the settlement, and we look forward to the release of the new Arnold Schwarzenegger bobblehead doll," said Todd Bosley, co-owner of Ohio Discount.
Schwarzenegger's lawyer Martin Singer said the governor was glad to see an end to the unauthorized uses of his image. "And he's happy to see the money going to charity," he said.