The $500K is in deferred revenue precisely because it hasn't been booked as revenue yet. That's what the deferred revenue account is for. That's why it's a liability account on the balance sheets and not on the income statement.
As for the accounting guidance you cited, the $1M up-front fee is not "Revenue generated from sales- and usage-based royalties from licenses of IP" because it's not a royalty. It's an "Upfront Fee." I don't see any requirements of the $1M in the agreement other than a signature, and the agreement says it's non-refundable.
This combined with the fact that they have received $500K and that there is a written agreement would seem to be enough to satisfy the GAAP requirements to record it as revenue. I don't know why they don't show it as earned; it seems something has changed that we have not been made privy to.
The only other reason I can think of is that as of the date of the Q they don't believe it's more likely than not that they will be able to satisfy their obligations under the agreement. Let's hope it's not that...
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