“A scheduled Tuesday court conference between Fox and Warner Bros. attorneys has been canceled,” the Hollywood Reporter‘s Borys Kit wrote late last night, “fueling talk that a settlement in the contentious Watchmen case is imminent.

“Fox sued Warners last February, saying the Burbank-based studio infringed on its rights to make the comic book adaptation. In December, when federal judge Gary A. Feess ruled that Fox has distribution rights to the film, Warners faced the prospect of having the film’s March 6th release blocked.

“Settlement talks between the two sides became serious over the weekend and continued to heat up yesterday.

“A settlement could cost Warners tens of millions of dollars. A case involving copyright ownership of Warners’ The Dukes of Hazzard, which Feess blocked from release in 2005, ended in a settlement worth a reported $17.5 million.

“With Watchmen, an adaptation of the Alan Moore graphic novel with a budget in the $130 million range, the financial stakes are higher. According to sources, Fox is asking for upfront fees as well as a percentage of the back-end.”