Warner Bros. was reportedly developing a third Mortal Kombat film, based on the popular '90s video game, but they are in hot water as Threshold Entertainment Inc. filed a breach-of-contract lawsuit on Tuesday in Los Angeles, reports The Wrap.  The basis of the suit stems from holdover legal rights to the Mortal Kombat property, which Threshold had established near the height of the fighting game's popularity in the early '90s with video-game developer Midway to bring the franchise to a variety of formats, including the two previous films, Mortal Kombat and Mortal Kombat: Annihilation.

For the full details of the lawsuit, including some convincing claims and thoughts, hit the jump.

Threshold claims that they signed a new contract with Midway in 2006 in hopes of creating a third film, but the project never fully developed. However, last February, things took a turn for the worse with Midway and they filed for bankruptcy. That is when Warner Bros. got involved, as they won rights to several properties in an auction, including Mortal Kombat.

According to The Wrap, Threshold claims a "federal bankruptcy court upheld its interests and licenses as a part of the sale."  That spells trouble for Warners, it appears.  Threshold also claims that Warners "failed to work with Threshold in the development and production of the third Mortal Kombat film," and hasn't even been in contact with the company.

This may be new territory for Warners, who have never developed a film based on the property, but in 2008 they bought up the previous co-producer of the films, New Line Cinema.  This means that Warner Bros. likely knew the relationship that Threshold had with the Kombat property.

According to The Wrap, Threshold will seek damages later. Personally, I think this property has run its course, as Mortal Kombat is far from a hot franchise these days and it would mostly play to the fanboys in a nostalgic sense. While the first film was a box-office success, making over $122 million worldwide, the second seemed to have already worn out its welcome as it only mustered $51 million.

It is interesting, however, that both films were PG-13 despite being based on incredibly violent video games. Perhaps Warners intends on aiming for an R-rating? Will we finally get real fatalities of brutal violence? Stay tuned.