Bethesda parent company Zenimax will pay out $2 million to Interplay as part of a settlement returning all Fallout MMO rights to the Fallout 3 publisher.

The settlement renders Interplay’s Fallout MMO license null and void, returning the right to develop a Fallout MMO back to Bethesda, and effectively shelving the Interplay and Masthead-developed Fallout Online for good. Interplay cannot develop any further games based on the Fallout brand or IP.

“While we strongly believe in the merits of our suits, we are pleased to avoid the distraction and expense of litigation while completely resolving all claims to the Fallout IP. Fallout is an important property of ZeniMax and we are now able to develop future Fallout titles for our fans without third party involvement or the overhang of others’ legal claims,” Zenimax CEO Robert Altman said, rekindling hopes for a Bethesda-developed MMO.

The agreement allows Interplay to continue to sell Fallout, Fallout 2 and Fallout Tactics until December 2013, but after that, rights to sell and market the three games returns to Bethesda. Zenimax will pay Interplay $2 million, but both sides will shoulder their own legal costs.

The legal dispute between the two companies came about when Bethesda claimed Interplay had failed to meet the terms of its Fallout MMO license agreement – namely, that it would secure at least $30 million in funding and begin development by April 2009.