A chief issue has been settled in a lawsuit that pitted sculptor James Earl Reid against the Community for Creative Non-Violence in a lengthy dispute over Reid's sculpture of a modern-day nativity scene, but the artist and the homeless advocacy group are still at odds.

The two sides have been fighting for more than three years over Reid's "Third World America," a nearly life-size sculpture of a mother and father huddled over an infant on a steam grate. Reid donated the time he spent creating the work, and CCNV paid $15,000 for his expenses.

Then the courts were called in.

Under copyright law, the creator of a work of art normally holds the copyright to it, but the party that commissions the work sometimes gains the copyright if the artist is considered an employee.

CCNV claimed that Reid was an employee because Mitch Snyder, who was then its leader, supervised the creation of the statue. Reid argued that he was an independent contractor and should retain the copyright.

The acrimonious case went all the way to the Supreme Court, which ruled in June that Reid was a freelancer and not an employee. The court sent the issue back to D.C. Superior Court to determine if the parties share copyright in the sculpture.

Under an agreement announced this month, CCNV has the right to make two-dimensional copies of the work, such as Christmas cards and posters. Reid has the right to make two- and three-dimensional copies of the statue, but is required to advise any purchasers of his copies that the sale will not benefit CCNV.

Representatives of both sides expressed satisfaction with the settlement, but there remains one issue in dispute.

The statue remains at CCNV, in downtown Washington near Capitol Hill, and Reid wants to temporarily remove it so he can make a master mold for copies.

CCNV leader Carol Fennelly has refused on the grounds that the statue is too fragile. "I don't think it will last a trip to the foundry," she said.

Reid's attorney, Charles D. Ossola, said the statue could be removed without harm, and without being able to do that, Reid's copyright interests are essentially meaningless. "He's completely stymied in terms of exercising his rights," Ossola said.

A trial date on the issue has been set for March in federal court here.