Woody Allen has won a $5m (£3.3m) out-of-court settlement from American Apparel after the US company used his image on adverts without consent.

He sued the clothing firm for using an image of him from his 1977 film Annie Hall without permission on billboards.

The firm had initially planned to bring up his personal life in its defence.

American Apparel had argued Allen was not worth the $10m he was originally seeking because of the controversy surrounding his family life.

Speaking outside Manhattan federal court in New York – where the case had been due to take place – Allen said $5m was “enough to discourage American Apparel or anyone else from ever trying such a thing again”.

He said: “I sued American Apparel because they calculatingly took my name, likeness and image and used them publicly to promote their business.

“Testimony revealed that American Apparel believed that fear of publicity would keep me from ever taking action.”

He said a scheme “to call a long list of witnesses who had obviously nothing to do with this case” had been rejected by the court.

“I suspect this dose of legal reality led to their 11th-hour settlement,” he said.

Meanwhile, American Apparel founder Dov Charney, who had the idea for the adverts – which also appeared on a website – told reporters the case was about “the dignity of ideas”.

“I am not sorry for expressing myself,” he said.

Allen, 73, who does not endorse products in the US, had said he had not authorised the use of the image, which depicted him dressed as an Hasidic Jew.

Last week, the company’s legal teams dismissed reports that it would bring up Allen’s relationships with wife Soon-Yi Previn and ex-partner Mia Farrow as part of its defence.

In 1992, Allen’s then-girlfriend Farrow discovered he was having an affair with her adopted daughter Soon-Yi, then 22.

American Apparel had earlier alleged that the relationship breakdown led to headlines around the world which had made the image worth less than the $10m (£6.5m) Allen was initially suing for.

But last week, the company’s lawyer Stuart Slotnick said the trial would, instead, focus on the right to free speech.

“At trial we will explain how the use of the image from the Annie Hall film was used to make a social statement and address social issues that were already subject to public discourse,” he said.

American Apparel had apologised for using Allen’s image in the billboards, which were taken down within a week of going up.