Timegate wins arbitration dispute against SouthPeak

Texas district Judge Keith Ellison has invalided an arbitrator's ruling that ordered Section 8 developer Timegate to repay the game's publisher, SouthPeak, $7.3 million in allegedly misused development funds. The ruling also rewrote Timegate's publishing contract with SouthPeak, granting SouthPeak a permanent license for Section 8's IP and its sequels.

The arbitrator's decision was thrown out on the grounds that the rewritten publishing contract did not match the intent of the original document. Arbitrators are allowed to rewrite legally binding agreements, but only so long as the resulting agreement matches the spirit of the original document. Timegate and SouthPeak's original publishing agreement was very clear that Timegate would retain all IP rights for the brand -- changing this was beyond the scope of the original contract's intent and was therefore inappropriate.

This all started back in the neolithic caveman days of 2009, when Timegate sued SouthPeak, claiming that the publisher had altered revenue reports in order to retain royalties meant for Timegate, which is embezzlement.

SouthPeak countersued, claiming that Timegate fraudulently misrepresented itself in order to convince SouthPeak (which acquired original Section 8 publisher Gamecock) to enter into the publishing agreement. It also claimed that Section 8's lackluster retail performance was solely Timegate's fault, and that Timegate had failed to contribute a required $2.5 million in development funds, misused the $7.5 million in development funds provided by SouthPeak, and failed to give SouthPeak revenue from Section 8's PC sequel and PS3 port.

This tale is likely far from over, however, as SouthPeak still has the ability to appeal Judge Ellison's ruling.

This article was originally published on Joystiq.