The sources said the two home appliance makers are hammering out the details of the agreement, in which LG would pay royalties to Matsushita and both firms would be permitted to use each other's patents.

Plasma display panels are used in slim televisions, monitors and other displays. They have increased their presence in the market because more people are opting for flat displays rather than bulky cathode-ray tube displays.

If Matsushita and LG put the matter behind them, the two firms will drop all lawsuits and injunction requests filed in Japan and South Korea in November.

Each had accused the other of infringement on patents related to technologies used in the panels.

Matsushita filed for an injunction with the Tokyo District Court on Nov. 1 to halt domestic sales of plasma displays made by LG, claiming the South Korean firm was using its technology that dispels heat from the panels. Matsushita also filed a request the same day with Tokyo Customs to stop the products from entering Japan.

LG filed a countersuit at the Seoul Central District Court two days later to halt South Korean sales of Matsushita's plasma panels and to seek compensation for damages on grounds that the Japanese firm infringed on its plasma patents.