Apple Inc. and battery maker A123 Systems LLC are preparing to settle a three-month-old lawsuit alleging Apple poached high-level battery engineers and chemists in violation of noncompete agreements, according to a recent court filing.

A123 said in a filing Monday in U.S. District Court in Boston that the two sides “have reached an agreement, signed a term sheet, and are in the process of drafting a final settlement agreement.” Terms of the deal have not been disclosed, and Apple and A123 representatives declined to comment...