JAKKS Pacific has lost its appeal to dismiss arbiters in its licensing negotiations with THQ Inc. over its wrestling franchise.

An appeal to the California Court of Appeals by JAKKS Pacific was concluded today in favor of the defendant, THQ Inc., in a case debating the royalty rates JAKKS earns on WWE videogames. The two companies, who have been fighting over these royalty rights for months, have been operating under an agreement that has been in effect since July 1, 2006. A court-assigned arbitrator will assist in finalizing a new agreement, but JAKKS’s plea to prolong the negotiations has been dismissed.

“Contrary to JAKKS Pacific’s statements that the arbitration process has been slowed for ‘a host of reasons,’ the sole cause of delay has been JAKKS,” said James M. Kennedy, THQ’s executive vice president of business and legal affairs. “We believed JAKKS’s position in its petition from the judge’s appointment of an arbitrator was wrong, and the Court of Appeals has now agreed. As we have stated since we filed suit to compel arbitration and appoint an arbitrator, we look forward to moving the arbitration process forward expeditiously, and we expect to prevail once an arbitrator has the opportunity to consider the facts in this matter.”

Brian Farrell, THQ president and CEO, emphasized the importance of the WWE deal, “The WWE is a tremendous brand and we have consistently grown this franchise in the video game space on a global basis, with life-to-date sales of more than $1 billion. We are excited about the continuing potential of this brand.”

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