UPDATE 1-THQ disputes Jakks' plan to extend joint WWE license

* Jakks notifies WWE of plans to extend videogame license

* THQ files lawsuit challenging extension plans

* Cos start arbitration proceedings

July 1 (Reuters) - Toymaker Jakks Pacific Inc (JAKK.O) said its joint-venture partner THQ Inc (THQI.O) filed a lawsuit disputing its decision to extend its videogame licensing with World Wrestling Entertainment Inc (WWE.N).

Videogame maker THQ filed the lawsuit in California Superior Court, claiming it was not ready to take a decision on the proposed renewal.

Jakks' and THQ's license with WWE is set to expire on Dec. 31, but Jakks said it plans to exercise its option to renew the license for an additional five-year term.

THQ, on the other hand, claimed that under the joint-venture agreement, Jakks does not have the right to issue a renewal notice unilaterally.

THQ also said the contract in the agreement, which prohibits it from publishing any wrestling-based videogames during the term of the joint venture agreement (expiring one year after termination of the WWE license) is unenforceable under California law.

Both Jakks and THQ have also initiated arbitration proceedings relating to these issues, Jakks said.

THQ competes with Electronic Arts (ERTS.O) and Activision (ATVI.O) in the multibillion-dollar global video-games market.

Shares of Jakks were up 2 percent at $13.05 in midday trading on Nasdaq, while those of THQ were up 5 percent at $7.50. (Reporting by Nivedita Bhattacharjee in Bangalore)