Epic Games Wins Silicon Knights Lawsuit

Five years of legal struggle between Silicon Knights and Epic Games concluded today, according to a tweet by Epic Vice-President Mark Rein. The jury found for Epic on all counts.

The court case, filed in 2007 by Too Human developer Silicon Knights against Epic Games, focused on claims that Epic had misrepresented the capabilities of its Unreal Engine 3.

Silicon Knights, a licensee of the Unreal Engine, asserted that problems with the engine had resulted in development delays and financial losses for the company.

Back when the suit was filed, Silicon Knights president Denis Dyack said the following about his frustrations with the engine’s lack of development:

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 [of War] 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.

Silicon Knights sought $58 million in damages from the lawsuit, but its court case hinged on testimony from a key expert, Terry Lloyd. When Epic’s legal team made a successful motion to exclude Lloyd’s testimony in late 2011, the lawsuit began to fall apart. On May 7, the Judge Dever III ruled that each one of Silicon Knight’s claims against Epic Games could not receive damages in excess of $1. Today, the jury officially found against all of Silicon Knight’s claims against Epic Games.

Furthermore, Epic Games is reported to have won its countersuit today, according to The Escapist. The Escapist reports that Epic Games won $4.45 million in damages with its countersuit. These claims are not fully verified by the companies involved and are likely never to be such due to their financial nature.

A breach of contract claim by Epic Games still awaits a hearing in front of a jury. If successful, Epic Games could potentially receive more money from Silicon Knights in the coming days.

Analysis: Reading the legal arguments under the surface of this case, the details of what happened between these two companies still remain remarkably murky. Sure, Silicon Knights’ president claims that Epic spent all of its licensing money making Gears of War instead of developing its engine, but they don’t seem to have any concrete proof. Furthermore, without Lloyd’s testimony, it’s remarkably uncertain just how the problems that the studio ran into with the Unreal Engine affected them financially. Did they deserve $58 million in damages or $1? It’s hard to say.

With so much of the information in this case shrouded in back-and-forth, he-said-she-said nonsense, it’s difficult to say just what happened and who was in the right. However, what can be said with certainty is that Epic Games has now proved that it’s the big boy on court. Licensing the Unreal Engine is a major revenue source for the company, and now that it’s just put an incredibly one-sided legal beatdown on a disgruntled licensee, I think it’s safe to assume that other licensees, such as Tripwire Interactive and Gearbox Software, are going to stay in line and play it safe for awhile.

Ultimately, it’s a sad day in legal hell for Silicon Knights. After five years of arguing and finger pointing, all the company has to show for it is $4.45 million in debt, a bad relationship with a major development resource provider, and a mountain of legal fees, all of which will certainly have an impact on the studio’s ability to develop future titles. For those of you who enjoyed Blood Omen: Legacy of Kain or Eternal Darkness: Sanity’s Requieum, it looks like you might have to settle with the next release from the company being a lot safer and a lot less cutting-edge.

Connor Horn

About Connor Horn

Connor is a laid-back long-haired California hipster who listens to music "you'll never find on the radio" and who voted for Ron Paul to "make a difference." His favorite kind of games are MOBAs and rogue-likes, and he is a huge fan of PC gaming and the future of digital distribution.