In the land of ones and zeroes, it’s consumers 1, Sony BMG 0.

The music giant agreed Tuesday to cease embedding compact discs with digital rights management software that limited the number of copies consumers can make of the music and harmed the computers of some consumers. It also agreed to pay fines in California and Texas.

Sony BMG entered a stipulated judgment with the Los Angeles County District Attorney’s Office and the California Attorney General’s Office to remedy a civil consumer protection complaint filed by the D.A.’s Consumer Protection Division and the attorney general’s Consumer Law Section. They made a similar agreement in Texas.

Each state will receive $750,000 in civil penalties and costs.

Complaint alleged that the business practices of Sony BMG — which owns and distributes albums on labels such as Columbia, Epic, RCA and Arista — constitute false advertising, unfair competition and unlawful computer intrusion.

Allegations that Sony BMG was using so-called spyware to garner information on consumers were found to be false by an outside agency, CyberTrust.

The stipulated final judgment in California contains no admission of liability by the parties, but it does provide a restitution program for consumer victims and $622,000 in civil penalties and $128,000 in agency costs of investigation and prosecution for each state.

Under the settlement, Sony BMG will provide refunds of up to $175 to California consumers, who will have 180 days to file a refund claim via a form available on Sony BMG’s Web site and must include a description of the harm and documentation of repair expenses.

An estimated 450,000 Californians purchased CDs with the DRM software covered by the restitution provision. An unknown number of those California buyers suffered damage to their computers and are eligible for refunds. The problems alleged in the complaint occurred only on computers with Windows operating systems.

A similar stipulated final judgment obtained by the Texas attorney general will be entered in Texas court, and additional actions by other state attorneys general and the Federal Trade Commission are anticipated soon.

Sony BMG voluntarily instituted an exchange program late last year that allowed consumers to trade in CDs with the digital rights management software for new ones. Company also destroyed all CDs with the DRM software that were in warehouses.

Prosecutors allege that between January and November 2005, Sony BMG issued 79 music titles that used two different forms of digital rights management software — Xtended Copy Protection and Media Max 5.0.

Sony BMG sold 52 titles containing XCP with total sales of $6.6 million and 27 MediaMax titles with $6 million total sales. Approximately 15% of these sales were in California.

“In trying to gain market share, companies need to be sensitive to consumers’ rights to privacy, especially in this electronic age,” said L.A. District Attorney Steve Cooley.