By Susan Arendt on March 12, 2008 | 10:50:30 AM
Rock Band developer Harmonix withdrew its lawsuit against Activision over unpaid royalties after Activision agreed to settle the matter out of court. According to the suit, two agreements covering the royalty rate for Harmonix were drawn up to deal with the possibility of a Guitar Hero game being created by another developer. One agreement was valid if a new Guitar Hero was built from scratch; a higher one was appropriate if the new game “incorporates, uses, or is derived from Harmonix property.”
Harmonix developed the first two Guitar Hero titles for publisher RedOctane. The Neversoft-developed Guitar Hero III was published by Activision. Harmonix claims that Activision paid out the lower royalty rate, despite using Harmonix tech to build Guitar Hero III, and therefore owes Harmonix another $14.5 million in royalties.
The suit also claimed that Activision still owes Harmonix royalties derived from Guitar Hero song downloads, ancillary products, and in-game advertising. Per the royalty agreements those proceeds are due only if Harmonix’s technology was used in the creation of the game. With no end in sight to Guitar Hero spin-offs, sequels, or downloadable content, the need to clearly define whether or not Harmonix’s claims are justified is obvious. Harmonix says that if Activision continues to pay out royalties at the current rate, Harmonix’s losses will will “mount at the rate of tens of millions of dollars per year.”
Activision, for its part, “believes it has made sufficient payments to Harmonix and the claims otherwise do not have merit,” according to General Counsel George Rose. The company agreed to settle the dispute with Harmonix out of court, rather than face a drawn-out legal proceeding.