Online free speech advocates chalked up a victory this week as eToys.com - a leading e-commerce site - dropped its lawsuit against a group of artists in Switzerland who had been posting provocative images at etoy.com.

The Swiss group will also receive up to $40,000 in legal fees from eToys, company officials said.

The settlement marks the conclusion of yet another controversy over domain names as renegade Internet developers create controversial Web sites offensive to corporations.

On Jan. 14, Ford Motor Co. decided not to appeal a ruling that allowed a local Mustang enthusiast to put some of the automaker's internal documents on the Internet. Ford officials said they were dropping the case - after a federal judge refused to block the site - because Web site designer Robert Lane had stopped using their logo.

In the eToys case, company officials gave no reason for settling the case.

``We're pleased with the outcome,'' eToys spokesman Jonathan Cutler said Wednesday.

An attorney for the Swiss group said it will be allowed to resume use of the etoy.com domain name.

Toy retailer eToys sued the artists at etoy.com in September, accusing them of trademark infringement and complaining that customers were accidentally going to the wrong site and being exposed to violent images and profanity.

On Nov. 29, a Los Angeles Superior Court judge issued a preliminary injunction, ordering the artists to stop using the domain name www.etoy.com. The judge warned etoy that it would face fines of up to $10,000 a day if it remained up.

But this week eToys reversed its position, a move etoy attorney Chris Truax in San Diego, Calif., said was a victory for the Swiss artists.

[Updated 1-27-2000]