Merlin Entertainments, the operator of the London Dungeon attraction, has been awarded "substantial" compensation after an out-of-court settlement was reached with the London Bridge Experience (LBE).

Merlin launched a legal challenge against the operators of LBE last summer over claims that the rival attraction had breached intellectual property rights and engaged in unlawful practices as part of an attempt to copy the London Dungeon attraction. LBE, which was opened in early 2008 by owners Lee and Danny Scriven in south London, will also pay Merlin's legal fees as part of the settlement, which also includes a number legally binding undertakings.

Glenn Earlam, managing director of Merlin's Midway Attractions division, said: "We would never object to fair competition from attractions offering a distinct proposition to visitors. However, the sort of activity undertaken by LBE was totally unacceptable and Merlin had no choice but to put a stop to their unlawful activity which was directly targeted at the London Dungeon." "The settlement of this litigation by LBE paying compensation, legal fees and providing legally binding undertakings is full justification for the action we took to protect our brand. It should serve as a warning that Merlin will fiercely defend its brands wherever they come under attack."

However, LBE insisted that the attraction had done nothing wrong and said it has always conducted its business in fair competition with the London Dungeon. James Kislingbury, LBE general manager, said: "The arrival of another London-based scare attraction was clearly too much for them to accept and as such, Merlin sought to impose a litany of operating restrictions on the London Bridge Experience, under which the attraction would have simply been inoperable.

"The pretence under which these operating restrictions were requested was that the London Bridge Experience was a scare attraction and so it was copying the London Dungeon's creative methods." LBE's founder and chief executive, Danny Scriven, added: "This has been a long and stressful process for me and my brother Lee. We invested everything we had in the London Bridge Experience and had no option but to try to protect ourselves from London Dungeon's unjustified attack.

"I am relieved it is over and that we can now get on with running our business in this fledgling industry. We have achieved our objective in creating the UK's Official Scariest Attraction and we look forward to continue building on our success."