Silicon Knights loses appeal against Epic Games, $9.2 million judgment upheld

By Stephany Nunneley, Saturday, 11 January 2014 15:54 GMT

Epic Games has prevailed in an appeal brought to court by Silicon Knights, which was ordered by a North Carolina federal judge in 2012 to pay $9.2 million to the Gears of War developers for copying code contained in Unreal Engine 3.

As reported by Gamasutra, the United States Court of Appeals upheld the lower court’s decision in a judgement handed down on January 6, 2014.

The legal battle between Epic Games and Silicon Knights has been raging since 2005, when Silicon Knights brought a case against Epic after paying the firm $750,000 for the right to use Unreal Engine 3 for development on Too Human.

Silicon claimed the engine didn’t work properly, and accused Epic of refusing to replace the software with a working version or returning its licencing fee. It also claimed Epic interfered with publishing contracts Silicon had with Microsoft and SEGA.

Epic filed a counterclaim with evidence proving Silicon Knights used Unreal Engine 3 to develop games outside of the Too Human licensing agreement including: The Ritualist for SEGA – which was cancelled; X-Men: Destiny which was published through Activision, and unreleased games Siren in the Maelstrom and The Sandman.

The firm’s lawyers showed evidence Silicon repeatedly copied thousands of lines of copyrighted code from UR3, removed the copyright notices, and even failed to remove or correct typographical errors Epic programmers had made.

Due to the overwhelming evidence, in November 2012, the federal judge presiding over the case ordered Silicon Knights to not only recall and destroy every unsold copy of Too Human and X-Men: Destiny at its own expense, but doubled the damages awarded previously by a jury from $4.5 million to $9.2 million to help cover $278,000 in costs, $2.1 million in attorneys’ fees, and $2.3 million in prejudgment interest.

Silicon Knights’ financial viability has been called into question of late: the firm suffered layoffs in 2011 and 2012, and in 2011 the Canadian Government refused to hand over a promised grant over claims funding conditions were not met by the developer.

A purported list of cancelled titles in development at the firm popped up in late 2012, and despite the various personnel and financial troubles, in May of last year, CFO Mike Mays said the studio was “definitely alive,” and the few remaining employees were “very busy”.

The firm’s founder, Denis Dyack joined up with Precursor Games, made up of many former Silicon employees, to work on Shadow of the Eternals, which was placed on Kickstarter, pulled, restarted, and ended well short of its funding goal. The firm put development of the game on hold as of September 2013.

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