Boundless launched with a mission to provide free and online alternatives to expensive college textbooks.

Within a matter of months, the founders were served with a lawsuit citing a violation of the Copyright Act from three major textbook publishers, Pearson Education, Cengage Learning, and Macmillan Higher Education. The suit was initially filed in March of 2012, and in May (about a month after Boundless raised $8 million in financing), the companies entered into a mediation phase.

Today, the companies reached a settlement, which will set a precedent for digital publishing and serve as a warning to future education technology startups.

According to Boundless founder and chief executive Ariel Diaz, the settlement will not impact the company’s “operational plans.” By this, he means that the company can still offer learning materials across all subjects, including biology, physics and economics.

Diaz seems confident that he won’t run into further trouble. He said the lawsuit was primarily targeted at the beta product, which offered students a free digital alternative to bulky textbooks. He claims that Boundless has evolved since then to include study tools and a “proprietary process for publishing our textbooks.” Boundless draws most of its educational content from Open Educational Resources and its team of experts.

“The content they are trying to protect is not copyrightable. The content in introductory textbooks are facts and ideas, and the order in which they are presented is pretty common for each subject area. These things are not copyrightable,” Diaz told us back in March, shortly after being served with the copyright violation suit.

Boundless is stressing that it will offer a complementary service to textbooks, which students can read “in addition to or instead of their assigned books for $19.99.” The company also offers a variety of free textbooks on its website and points to other third-party websites. Educators can adopt and customize these textbooks.

In a blog post reflecting on the settlement, Diaz said the lawsuit hasn’t stagnated the company’s growth. He wrote that Boundless has doubled its team, increased its content, and expanded its base of students to more than three million.

In a press release, publishers hinted that they won’t hold back in the future against upstarts like Boundless. “We will continue to safeguard the rights of our authors and take action against the misappropriation of our content by any and all parties,” said James McCusker, a Cengage spokesman.

The terms of the settlement are not available to the public, and it’s not clear if any money traded hands. Here’s the official statement from the agreement:

In agreeing to a confidential settlement agreement, along with a public judgment and injunction entered by the Court, the parties have resolved the dispute. The resolution allows the parties to move forward and focus on their mutually shared goal of helping students learn. Boundless now has a clear path for building and marketing its OER-driven textbook alternatives without treading upon the Plaintiffs’ rights, and it is confident that it is in compliance and will not have further legal issues with the Plaintiff publishers. In turn, Plaintiffs have reinforced the strong protection they have in and to their copyrighted works and the related goodwill that they and their authors have established, and look forward to Boundless operating its business within the agreed upon framework.