Silicon Knights sues Epic Games

Too Human developer takes Unreal Engine creators to court, saying they broke contracts with licensing partners in order to give Gears of War a head start on the competition.

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Last August, rumors spread that Silicon Knights was ditching Unreal Engine 3 for its long-awaited Xbox 360 game Too Human, because the frequently licensed game engine supposedly ran poorly on Microsoft's console. Those rumors didn't last too long before Silicon Knights president Denis Dyack squashed them in a statement, saying rumors of the group "completely scrapping" the engine were false.

Despite Dyack's statement, those rumors appear to have been partially true, as revealed by Silicon Knights this week in a 54-page lawsuit it filed against Epic Games over Unreal Engine 3. In its complaint, the Ontario-based developer claims that it licensed the engine based on "false and misleading statements" from Epic. Silicon Knights said the Gears of War creator's contractual breaches forced it to begin making its own game engine last May, just before an underwhelming public debut of the Unreal-powered Too Human at the Electronic Entertainment Expo.

According to the suit, Epic "has caused Silicon Knights to experience considerable losses and ultimately has forced Silicon Knights to spend its limited time and resources on building its own game engine rather than in developing its video game." It goes on to say that instead of supporting its licensing partners, Epic has used its fees to develop its own competing products "while simultaneously sabotaging efforts by Silicon Knights and others to develop their own video games."

Epic Games fired off an e-mail to various press outlets this afternoon to address the suit. "This morning we were served with a lawsuit by Silicon Knights," wrote Epic Games president Mark Rein. "We believe the claims against us are unfounded and without merit and we intend to fully defend against them. We'd love to tell you more about it but unfortunately our lawyers want us to save our comments for the courthouse so we're going to do our best to comply with their wishes. In that vein we'd appreciate if our friends in the industry and media would refrain from asking us about the suit because we're only going to say 'no comment.' We just wanted to share the news directly before the rumor mill starts churning."

The suit describes part of the licensing agreement, which called on Silicon Knights to use Unreal Engine 3 exclusively in its Xbox 360, PC, and PlayStation 3 games and advertise them as being powered by the technology. For Epic's part, it had to provide a working engine for the Xbox 360 and PS3 within six months of each system's final development kits being sent out, as well as continued support and updates. For the Xbox 360, that would have meant March of 2006. (The suit notes that Silicon Knights has contracted with Sega to make a PS3 game; originally the title was announced for an unnamed console.)

"That delivery date is significant, since compliance by Epic would have given Silicon Knights time to prepare an appropriate demonstration version of its Microsoft Xbox 360 game, Too Human, for the very important industry trade show, E3, two month[s] later in May, 2006," the suit reads. "Had Epic complied with its promises and contractual obligations, Silicon Knights would have had the opportunity not only to generate a positive press and industry response to Too Human, but also to finish the game earlier and on better financial terms."

Silicon Knights claims it received a working Xbox 360 build of the engine a year after Microsoft's system commercially released. Even then, the developer claims it was not told how to implement the code into its development efforts, and that if they rigged the engine themselves in order to make it work, Epic would not support the altered product. As for the PlayStation 3 version of the engine, Silicon Knights said it is still waiting to receive it, even though the agreement called for it to be delivered in February.

The studio also attributes the delay of Too Human from its 2006 release date to Epic, saying it "faced pressure from its publishing partners to nonetheless move forward with development of its games, and with respect to one of those partners (Microsoft), to complete its game as early as possible in 2007." That alone has cost the company millions in labor and potential profit, according to the suit.

As for Epic, the suit claims the company was perfectly able to make a workable version of Unreal Engine 3 for E3 2006 to show off its own Gears of War, but withheld the technology from its partners for its own advantage. When pressed for the updates and engine tweaks that allowed Gears of War to run well, Silicon Knights says it was told those updates were "game specific" enhancements not covered by the agreement, as opposed to an "engine level" update that would be covered.

Silicon Knights claims those partners were stuck with an Xbox 360 engine that was unable to handle multicore processing, subject to long load times, inefficient memory usage, and crippling slowdown. The developer further claims that Epic would ignore its requests to correct those problems unless doing so would also benefit the development of Gears of War. It also said Epic consistently advised licensees to code things like particle effects in one manner, while at the same time using a completely contradictory method in Gears of War.

The suit accuses Epic of a number of misdeeds, including fraud, negligent misrepresentation, intentional interference with contractual obligations, breach of warranty, and unjust enrichment. Silicon Knights is seeking to have the contract between itself and Epic Games declared null and void and be refunded all of the money it spent to license Unreal Engine 3. The developer also wants to be awarded punitive damages for the offenses it alleges Epic committed. Finally, the studio is asking that Epic be forced to surrender all profits garnered by Gears of War as a result of misconduct.

"That advantage was nowhere more evident than at E3 2006, where Gears of War was awarded 'Best Game in Show' and garnered nothing but laudatory press," the suit reads. "By contrast, Silicon Knights--one of the only other developers to publicly display a playable demonstration of its game--saw Too Human roundly criticized in the videogame press for its technical problems and generally unpolished appearance. The damage to Silicon Knights caused by Epic's misconduct was manifest, because E3 attendees were able to compare Too Human with another game running ostensibly the same game engine, Gears of War, with vastly superior results."

The suit says that the new engine, which it simply refers to as "The Silicon Knights Engine," is built on Unreal as per the original agreement, but improves considerably on the technology. Furthermore, after the release of Too Human, all Epic code in the engine will be removed.

[UPDATE] Silicon Knights president and founder Denis Dyack released a statement about the suit, saying, "Our strong preference is to focus on making games, not be in court. Unfortunately though, as explained in our lawsuit, we have had extensive problems with the Unreal Engine 3 that Epic has been unwilling or unable to rectify. For more than a year, we have been trying to reach an agreement with Epic to resolve these issues without resorting to litigation, but were unable to come to reasonable terms with Epic. ... No doubt Gears is a fun and phenomenally successful game, but as we alleged in our complaint against them, we strongly believe that from the perspective of someone waiting for a game engine that Epic promised it would deliver almost two years ago, it seems pretty clear that Gears was built on the backs of the Unreal Engine licensees. We certainly stand by our allegations in the lawsuit that instead of using our licensing fees to develop and support the Unreal Engine 3, Epic used that money to build Gears."

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