THQ has prevailed in its long-running royalty rate dispute with WWE joint venture partner Jakks Pacific.

An arbitrator ruled that toy maker Jakks is entitled to six per cent of sales from THQ WWE games, as opposed to the previous rate of ten per cent. The change in rate is retroactive to July 1, 2006, and runs through December 31, 2009.

As a result, THQ expects to report a one-time benefit of approximately $23 million during the second quarter of the 2010 fiscal year.

“Additionally, we estimate that the reduced royalty is worth roughly $8 million in annual incremental operating income,” noted Cowen analyst Doug Creutz in a research note.

James Kennedy, THQ's executive vice president of business and legal affairs, said of the ruling: "As we expected, we have prevailed in this matter. We are gratified the arbitrator agreed the preferred return rate to Jakks Pacific on WWE videogames will be significantly lower."

THQ has clashed with Jakks on a number of occasions since the pair partnered for their WWE joint venture in 1999. Most recently, Jakks Pacific said that THQ had filed a lawsuit disputing the toy maker’s decision to extend their WWE licensing agreement for an additional five years beyond its current expiry date of December 31.