IBM's lawsuit, filed in US court in Delaware in 2016, alleged Groupon used IBM's patented e-commerce technology without authorisation.
A jury sided with IBM in July, ordering Chicago-based Groupon to pay $83 million in damages.
The settlement also included a long-term patent cross-license agreement between the companies.
William Lafontaine, IBM's general manager of intellectual property, said in a statement the deal demonstrates the value of the intellectual property the Armonk, New York-based company derives from its annual investment of more than $5 billion in research and development.
Bill Roberts, Groupon's vice president of global communications, said in a statement that the license it acquired to IBM's patent portfolio "will enable Groupon to continue to build amazing products for consumers and small businesses around the world."
During the trial, IBM had asked the jury to award $167 million in damages, saying it developed widely licensed technology crucial to the development of the internet.
Two of the IBM patents at issue in the case relate to Prodigy, a late-1980s precursor to the web.
The case was closely watched in the technology industry because it offered a glimpse into IBM's efforts to license its large patent portfolio to other companies.
An IBM licensing executive testified that Amazon, Facebook, Alphabet's Google, LinkedIn, and Twitter have each paid IBM $20 million to $50 million as part of cross-licensing deals that gave them access to the patent portfolio.
In 2017, IBM generated about $1.2 billion in revenue from its licensing activities.
During the trial, Groupon's lawyer portrayed IBM as using outdated patents to squeeze money out of other tech companies with threats of litigation.
Groupon on September 19 had asked a judge to throw out or reduce the verdict, calling it unsupported by the evidence.
© Thomson Reuters 2018