THQ has notified World Wrestling Entertainment that they have filed suit against Jakks Pacific over the decision by Jakks Pacific to exercise a clause in the licensing agreement with the WWE to extend their licensing deal for video games. THQ claims that Jakks Pacific was not authorized to make a unilateral decision to extend the contract.

THQ handled the development for the Smackdown vs. RAW as well as the Legends of Wrestlemania franchise in a cross-licensing deal with Jakks. Reportedly, the extension would extend the current contract from December 31st, 2009 to December 31st, 2014.

Our sources claim that the WWE license has been the subject of much controversy. Back in May, the WWE lost its appeal against THQ and Jakks for a variety of claims. The battle has raged for some time between the WWE and Jakks/THQ. One of the main sticking points that THQ has with their current deal is that the clause prohibits them from publishing any wrestling game for a period of one year after the termination of the WWE contract.

Our moles are suggesting that THQ might in fact be attempting to extricate itself from the WWE contract to perhaps move to producing a wrestling title for up and coming wrestling promotion TNA Wrestling, whose license was previously owned by Midway, but appears not to be a part of the IP purchase deal that Midway has with Warner Bros. However, the TNA Wrestling license might be more valuable to THQ because they would not be involved in the reported three-way revenue split that they have on the WWE licensed wrestling titles that they are producing now. In other words, THQ could perhaps generate more revenue on a TNA wrestling title because of more favorable terms.

Jakks is claiming that they are entering into arbitration proceedings with THQ over their issues that the two companies currently have. No additional information has been released on a timetable for these proceedings to take place. From what we understand, THQ is still planning Smackdown vs. RAW 2010, anticipated to be released later this year. It is unknown if all of the legal wrangling will affect what could be THQ’s last release in the series. Currently, word is that the Smackdown vs. RAW 2010 is still on track for release later this year.