Microsoft Tuesday said it has settled a lawsuit that it filed two years ago against the self-proclaimed "King of Spam," Scott Richter, who at one time helped distribute more than 38 billion unsolicited e-mails per year.

Richter and his online marketing company, OptInBig.com, have agreed to pay Microsoft $7 million to settle the suit, which was filed in December 2003 , Microsoft and Richter said in a joint statement.

He and his affiliates have also agreed to comply with U.S. federal anti-spam laws and stop sending spam to anyone who does not opt in to receive marketing e-mails, according to the statement.

The settlement depends on the dismissal of bankruptcy cases filed by Richter and his company earlier this year. Richter and OptInBig plan to file for dismissal of those cases later Tuesday.

After refunding its legal costs, Microsoft will pump $5 million of the settlement money back into fighting Internet crime, by providing technical training and forensic assistance to law enforcement staff and developing new technology tools, it said. A further $1 million will provide computers for poor children at community centers in New York state.

Helped by Microsoft, New York Attorney General Eliot Spitzer also sued Richter over spam offenses in December 2003. Spitzer settled that case with Richter last July for $50,000.

Microsoft's case, brought in Washington state, accused Richter of sending mass e-mails with misleading subject lines and forged sender addresses in violation of state and federal law. Before mending his ways he sent, or helped others to send, 38 billion unwanted e-mails a year, Microsoft said.

Richter has freely admitted to sending large volumes of unsolicited e-mail and has cheerfully embraced the title of "Spam King." But he has denied breaking any laws, saying his company operated within U.S. regulations including last year's CAN-SPAM (Controlling the Assault of Non-Solicited Pornography and Marketing) Act.

As part of Microsoft's settlement, OptInBig.com has agreed to three years of oversight.

The case shows that strong partnerships between governments and the private sector are vital for fighting spam and other Internet problems, Brad Smith, Microsoft's general counsel, said in a statement Tuesday.

"This one legal victory will not end spam, but it is a relief to know that the magnitude of spam attacks need no longer be measured on this particular Richter scale," he said.

The IDG News Service is a Network World affiliate.