Nike (NYSE:NKE) has settled its contentious free speech lawsuit for $1.5 million. The case raised questions about the Constitutional protections afforded commercial speech, and brought out support for Nike from institutions as diverse as the Associated Press, the New York Times (NYSE:NYT), the American Civil Liberties Union, and ExxonMobil (NYSE:XOM).

California labor activist Marc Kasky filed the lawsuit in 1998, after Nike responded to criticisms about its treatment of workers in overseas factories. Nike defended itself through a public relations campaign, arguing that its subcontracted factories weren't sweatshops, and that its workers there were treated fairly.

Citing a California law that protects consumers from false advertising, Kasky's lawsuit charged that Nike's press releases and fact sheets amounted to lying about the conditions in its overseas factories. The case quickly cut right to the heart of free speech and the First Amendment, with Nike saying that it had the Constitutional right to explain and defend itself to customers, shareholders, and the public at large. Others held that Nike's public relations responses should fall under truth-in-advertising statutes.

The suit eventually reached the Supreme Court, but was dismissed last June without any decision. That meant that it returned to California, and that Nike would have had to defend itself in what was likely to be lengthy litigation. Some free speech advocates lamented at the time that the Supreme Court avoided making a decision one way or the other on the issue.

The money put up by Nike will go to the Fair Labor Association, and will be used for better monitoring and education efforts for factories and workers worldwide. Nike isn't admitting or denying guilt, leaving the question open of whether or not it actually lied about factory conditions. Questions concerning whether Nike's campaign should have been protected speech or not will linger on, as well.

Nike's undoubtedly glad to sweep this mess under the rug and move on without getting bogged down in a long defense of itself. For legal scholars and free speech activists, though, it's an unsatisfactory end to a compelling case.

LouAnn Lofton owns shares of Nike.