Electronic Arts is the company that published Brütal Legend. Sierra Entertainment, a subsidiary of Vivendi Games, was originally intended to publish the game before their merger with Activision. After the merger however, Activision dropped the game, leaving Brütal Legend in limbo. In 2008, it was confirmed that Electronic Arts would publish the game.
In February 2009, Activision Blizzard had asserted that the Electronic Arts deal was invalid, believing that they were still in negotiations with Double Fine to publish the game. It was believed that Activision was seeking monetary compensation in a similar manner as it received from Atari for Ghostbusters: The Video Game and The Chronicles of Riddick: Assault on Dark Athena, games that were dropped when Activision Blizzard re-evaluated their assets. On June 4, 2009, Activision filed suit to prevent publishing of the game, claiming that they had invested $15 million in the title and still had a valid contract to release the game. Activision's suit also contends that Double Fine had missed a deadline for the game last year, requesting more time and an additional $7 million in development fees. Activision's considers both the loss of the money they spent on the game as well as potential sales and Brütal Legend-related merchandise as part of the harm done in the lawsuit.
In July 2009, Double Fine issued a countersuit against Activision, citing that the latter company had abandoned the project before, and was trying to harm Brütal Legend during its critical marketing phase, as well as trying to protect its Guitar Hero franchise. The countersuit stated that Activision had dropped the game after its merger with Vivendi and a failed attempt to convert the game into a Guitar Hero sequel. Schafer was quoted as saying, in commenting on their actions, "Hey, if Activision liked it, then they should have put a ring on it. Oh great, now Beyoncé is going to sue me too."
Though most the developers involved in the game were shielded from the effects of the lawsuit, Double Fine's Caroline Esmurdoc noted that it took a significant toll on Schafer and the other lead executives at the company. Activision's lawsuit had been filed at the time the game had reached the alpha release state, and would need to be concluded prior to the game's final release; this required the executives to dedicate their time towards information gathering, interviewing, and other legal matters "during the crunchiest, most critical time of development". As such, while they ultimately were able to settle the legal matter, Esmurdoc believed that the impact of the effort in settling the lawsuit impacted the quality of the final product. Schafer wrote more than 50% of the game's dialog in the few months following the completion of the lawsuit and prior to release, a "big crunch" for him.