Guitar Hero Suit Comes, Goes

On March 10 Harmonix Music Systems, Inc., filed a lawsuit against Activision for unpaid royalties relating to "Guitar Hero". Harmonix developed the first two "Guitar Hero" games and the "Rock Band" game, and claimed that Activision owed it more than $14 million in royalties related to "Rock Band III" and related spin-offs because Activision used Harmonix' technology.

Harmonix claimed that its agreement with the publisher Red Octane (now owned by Activision) sets a higher royalty rate if any "Guitar Hero" sequel uses or is derived from Harmonix' property, and that Activision was only paying royalties at the lower rate. Activision, not surprisingly, said in a statement that it had paid the correct royalties.

Late on March 11, Harmonix' owner Viacom announced it was withdrawing the suit because the parties were engaged in out-of-court discussions.

This episode demonstrates how filing a lawsuit can be an effective negotiating tool, or at least a way to bring both parties to the table. It's not clear whether there had been previous discussions, or whether Harmonix approached Activision with its concerns before starting the action.

Coverage at Variety and Gamasutra. Variety has a copy of the lawsuit here.