BOSTON (AP) _ For the third time, Lotus Development Corp. has used the legal system to stop a competitor from selling software that echoes Lotus' popular 1-2-3 spreadsheet program.

Now the Cambridge-based company is preparing to take its copyright argument against one more rival, Borland International Inc.

Lotus' latest conquest came Monday, when it announced an out-of-court settlement with The Santa Cruz Operation Inc. Lotus accused the software company of selling a program, called SCO Professional, that copied the commands and appearance of Lotus' 1-2-3 program.

Under terms of the settlement, Lotus will drop its suit, and the Santa Cruz, Calif.-based company will stop making and selling all versions of SCO Professional by Aug. 15.

Also, Santa Cruz Operation will recommend that customers using SCO Professional switch to Lotus, which will work with Santa Cruz Operation in the future to develop versions of 1-2-3 that work on SCO's Unix computer operating system.

''We're putting this to rest and moving forward,'' said Zee Zaballos, a Santa Cruz Operation spokeswoman.

She said SCO Professional represented about 1 percent to 2 percent of revenue for the privately held company.

Spreadsheets are popular business programs containing columns and rows of figures that are used for financial analysis and budget preparation.

Lotus first successfully used a copyright argument to thwart a competitor last year. In a case against Paperback Software International of Berkeley, Calif., a federal judge in Boston ruled that copyright laws extend beyond the inner workings of the program and also cover on-screen images and keyboard commands.

Lotus later used a similar argument to force a small Cambridge company, Mosaic Software, to stop selling its spreadsheet program.

Meanwhile, bolstered by its victory in the Paperback case, Lotus filed suits against Santa Cruz Operation and Borland. With the announcement of Monday's settlement, the Borland case is the only one remaining.

Both Borland and Lotus were scheduled to appear in federal court Tuesday for a pretrial hearing. Bryan Simmons, a Lotus spokesman, said his company also is seeking a summary judgment.

Borland, which has emerged as a strong competitor for Lotus, said in a statement that the SCO settlement won't affect its case.

''Quite frankly, we are glad to have the litigation simplified,'' the company said.

Lotus maintains that Borland's Quattro Pro spreadsheet essentially offers the customer two different programs - one that is distinct from 1-2-3 and another that imitates it.

''We believe Borland is selling our product, and our product is not theirs to sell,'' Simmons said.

But Borland, based in Scotts Valley, Calif., said in its statement that Quattro Pro ''is a unique product that does not infringe any copyrights of Lotus 1-2-3.''

Because the court already ruled that the so-called ''look and feel'' of the program is protected under copyright laws, Borland's only defense is to argue that its product is sufficiently different from 1-2-3, said Lee T. Gesmer, a Boston attorney specializing in technology law.

But Gesmer added: ''The fact that (Borland) has a non-infringing alternative is not a viable defense. That does not mean the infringing alternative is forgiven.''