Sierra On-Line, the Washington-based game-maker, has been quietly proceeding with plans for a massive online role-playing game based on the Middle Earth characters -- but only if the price is right, apparently.

Los Angeles game developer MM3D filed suit against Sierra, claiming the company earlier this month breached MM3D's contract to create what it called the ''Tolkien Online RPG'' by trying to force the developer to accept diminished terms and a 50 percent cut in revenue from the project.

MM3D demanded damages of at least $10 million -- pointing to the presumably enormous scale of the anticipated game. Typical video games cost less than half that amount to develop. But so-called role-playing games like Sony's EverQuest can have development costs as high as $12 million, and may draw 80,000 or more players at one time by way of the Internet.

A Sierra spokesman said the company hadn't been served with the suit. Despite the filing, she said Sierra is in negotiations and MM3D, and declined further comment. In a statement posted on its Web site at mm3d.com, the developer on Tuesday posted a statement that reads: ''MM3D is hopeful about working this out with Sierra On-Line. We have enjoyed a good relationship with Sierra in the past and we would like to enjoy a positive relationship with them in the future. We hope Sierra On-Line will honor its agreements.''

In 1998, several reports said the Washington company was planning a Tolkien-based game. In the wake of lay-offs and game cancellations two years later, the company said it was continuing to plan games based on its Tolkien licenses; but details remained sparse, and the gaming community speculated that the Middle Earth project had been abandoned, even as AOL Time Warner's New Line unit moved into production with its three Lord of the Rings pictures, the first of which is set for release in the U.S. on December 19.

MM3D's sparse, seven-page complaint made it clear that the Sierra project was to remain shrouded in secrecy. According to the suit, the Los Angeles company had signed a confidentiality agreement and actually had to request permission from Sierra to disclose the existence of its agreement in the legal complaint -- but filed anyway, when Sierra didn't respond to a request for consent.

In the bare-bones complaint, Sierra said it entered a written agreement to produce the Tolkien game in February of 2000, and was to negotiate final terms within a framework set by the initial deal. On April 9, 2001, however, Sierra demanded that the developer accept radically reduced terms, and slash its own revenue from the deal by half, according to the complaint. No final agreement was ever reached, the suit said.

A New Line spokesman wasn't available to answer queries about any connection between the studio's film project and the game.