The tentative deal, disclosed on Monday in court filings here, offers up to USD 14 million for those who paid licensing fees to use the song, Los Angles Times reported.
The settlement is tentative pending approval by US District Judge George H. King.
If the judge signs off on the agreement, Warner/Chappell Music would no longer collect fees to use the song, which by some estimates brought the company as much as USD 2 million per year in royalties.
The tune, written in 1893 by Patty Smith Hill and her sister Mildred J. Hill was originally titled "Good Morning to All." The sisters included it in a children's music book and left the copyright with their publisher.
At some point, the "Happy Birthday" lyrics were added. In 1988, Warner began collecting royalties for "Happy Birthday" after it purchased the company that had the copyright from the Hill sisters' publisher.
But the judge ruled in September that Warner/Chappell and other prior companies never had the right to charge for use of the song.
The exact terms of the settlement were hammered out during the last week, which featured "almost around the clock" negotiations, lawyers wrote in court papers.
Two other groups related to the Hill family also joined the settlement: the Association for Childhood Education International, a designated charity of the Hill family that receives a third of the song's licensing profits, and the Hill Foundation. Both groups argued they were the true owners of the song's copyright.
The tentative settlement allows those who paid for use of the song as far back as 1949 to recoup some or all of their money, according to court papers.
A hearing on the preliminary approval of the settlement is scheduled for March 14, the report said.
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