Who's got the rights to Shenmue Online?

Earlier in the month, Japanese PC game site 4Gamer.net reported that Shenmue Online developer JC Entertainment had stopped work on the project, with Sega transferring the game's creation to an unnamed studio based in Taiwan. JC Entertainment, a seasoned Korea-based online game maker, had been working on the project since last year.

Now 4Gamer reports that a source from JC Entertainment revealed additional information during "e-ty Summer2005," a promotional event held by the company this week in Korea to show off its new online basketball game FreeStyle. According to the source, Sega and JC Entertainment's relationship has ended bitterly, as previously reported, and the situation is far from being resolved. "Sega and JC Entertainment are exploring for ways to make a peaceful settlement. They've agreed that they won't worsen the situation to a point where it involves legal actions," the source told 4Gamer.

For Sega, the break with JC Entertainment is more difficult than canceling an agreement with a usual subcontractor, because, as it turns out, the developer actually owns half of the intellectual rights to Shenmue Online. And according to 4Gamer's source, the company plans on holding on to its share. The source declined to answer whether the company plans on making any profit out of its share of intellectual rights, but there's no question JC Entertainment holds a powerful bargaining chip for its negotiations with Sega.

Shenmue Online's official English site and Chinese site are operational at the current time, but the Korean site is no longer functioning.