Founders of Lodestone Entertainment, Corey Fong and John Tam, are forbidden to develop Guitar Hero-style games for the next 12 months.
The pair have also been instructed not to release musical peripherals similar to Activision products until six months after release.
That's the details of the settlement between the ex-Red Octane employees and Guitar Hero publisher Activision, who had left the company to develop and sell rival products to the popular software and peripheral, according to a report on Gamespot.
Tam and Fong have also been ordered to return any Guitar Hero materials they may have to the publisher.
The 12-month ban details that Tam and Fong are prohibited from creating any guitar, drum or synthesizer-based games, which may give some indication as to what Activision intends to do with future iterations of the franchise.
The scramble to maximise the success of Guitar Hero has lead to a number of developer and publisher changes.
Original Guitar Hero publisher RedOctane was bought by Activision, which has now given development duties of the series to Tony Hawk's developer Neversoft.
The original developer of the series, Harmonix, was bought by MTV last year, and the two companies have recently announced a partnership with Electronic Arts to create the game Rock Band, due for release this Christmas.
Guitar Hero II for the Xbox 360 goes on sale this week in Europe.