Terms of the deal were not disclosed, but Lululemon said the lawsuit will be dismissed as a result.
The trendy yoga gear maker filed the suit against PVH Corp.'s Calvin Klein and G-III Apparel Group Ltd., a manufacturer and supplier for the brand, in August.
The Vancouver-based retailer filed design patents for the Astro line of pants as early as September 2011, but filed patents on its crop pants much more recently, in June.
Lululemon had claimed that Calvin Klein sells pants under its "Performance'' brand that include the same waistband design elements and pant style, which is covered by its patents.
The waistband in question, featured on Lululemon's Astro line of pants, consists of a series of angular pieces of fabric that form a v-shaped waistline that can be rolled down to sit lower on the waist. They're made of the company's trademarked Luon fabric.
Calvin Klein's pants also have a v-shaped waistline, but retail at a fraction of the price.
Lululemon's Astro crop pants are $78 on its website, while the Calvin Klein knee length running tights are $39 on Amazon.com. The longer version of the Astro and Performance tights retail for $98 and $60 respectively.
Much of Lululemon's success can be attributed to carefully managing its brand image, made up of both its yoga-inspired philosophy and its functional, flattering and comfortable workout wear that has been endorsed by Oprah and other celebrities. Its logo is now ubiquitous in yoga studios and gyms.
Already a household name in Canada, Lululemon has been growing in popularity in the United States and Australia, where the company continues to open new stores.
While other specialty clothing retailers have struggled in the tough economy, Lululemon has consistently boosted quarterly profits and revenues as its reputation grows.
Last year, the company began an initiative to boost its inventories to meet the growing demand of shoppers and appease those who were confident the company could grow faster.
Lululemon opened its first store in Vancouver in 1998 and now has 47 stores in Canada, 108 in the United States, 18 in Australia and one store in New Zealand.
Shares in Lululemon were up 74 cents to close at $71.49 Tuesday on the Toronto Stock Exchange.
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