Chiefs at the Tolkien Estate Ltd. have accused the executives, who own the rights to the film franchise, of creating online slot machines and other digital merchandise based on characters in the famous book trilogy without their permission.
On Monday (19Nov12) they filed legal papers at the U.S. District Court in Los Angeles for copyright infringement and breach of contract, alleging at the time of Tolkien's death in 1973, Warner Bros executives were only granted permission to make profit from tangible goods such as books and clothing items.
The executors are hoping to resolve the royalty dispute as quickly as possible.
A spokesperson tells Deadline.com, "Not only are gambling services outside the rights granted, but this exploitation of Tolkien's well-loved work has offended and distressed Tolkien's devoted fans, harming Tolkien's legacy and reputation.
"The plaintiffs have been compelled to take this action to protect their literary and commercial assets and hope that the dispute will be resolved quickly."
The lawsuit is the latest slice of Lord of the Rings bad publicity for the distributors - animal rights activists have taken aim at director Peter Jackson and his producers over alleged creature mistreatment during the filming of prequel The Hobbit: An Unexpected Journey.
The producers have denied allegations many of the 27 animals that died during the shoot perished as a result of poor conditions and incompetence among trainers and handlers.