July 1, 2009 / 4:29 PM / 9 years ago

UPDATE 2-THQ disputes Jakks' plan to extend joint WWE license

* Jakks notifies WWE of plans to extend video-game license

* THQ files lawsuit challenging extension plans

* Cos start arbitration proceedings (Adds analyst comments, background)

By Nivedita Bhattacharjee

BANGALORE, 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 their video-game licensing with World Wrestling Entertainment Inc (WWE.N).

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

“This may be an attempt by THQ to not renew, and hope WWE signs (a video licensing deal) directly with them,” Wedbush Morgan Securities analyst Edward Woo said.

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

Both Jakks Pacific and THQ make about $20 million a year from the deal with WWE, Woo added.

When Jakks got the license from WWE in 1999, it partnered with THQ to make the video games, the analyst said.

However, in 2004, WWE had sued Jakks, accusing the toy company of bribery to win the agreement.

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.

The video-games maker, 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 deal, which prohibits it from publishing any wrestling-based video games during the term of the joint venture agreement — that expires a year after termination of the WWE license — is unenforceable under California law.

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

Jakks stock was up 2 percent at $13.05 in late trade on Nasdaq, while that of THQ was up more than 6 percent at $7.62. (Editing by Vinu Pilakkott, Himani Sarkar)

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