Game Stooge

Stooge Legal Brief: Silicon Knights v. Epic Games

• Scribbled on July 19th, 2007 by S Holmes
• Filed in Editorial Content, Industry News, Legal Brief, Off Topic

Nobody likes reading legal documents, especially 54 pagers like the one filed by Silicon Knights against Epic Games. So, the Game Stooge Legal Brief is here break it down for you. And, in stark contrast to most lawsuits, this one is actually quite interesting.

Back in 2005, Silicon Knights (SK) licensed the Unreal Engine from Epic for use in SK’s upcoming games. Basically, the Unreal Engine allows games to have realistic physics and lighting effects as seen in many games, including Unreal Tournament and Gears of War. Epic created it and allows other game developers to use (”license”) it in their games if they pay a price (”licensing fee”). So, these companies, including SK, become “licensees” of the Unreal Engine once they’ve paid the licensing fee.

But what the lawsuit boils down to is that, after paying the licensing fee, SK thinks Epic delayed giving SK the console specific coding necessary for using the Unreal Engine on the Xbox 360 and the PS3. Such a delay would be a breach of the license agreement (”contract”) between Epic and SK. This delay supposedly kept SK (and other licensees of the Engine) from preparing its games for the next-gen consoles and ultimately forced it to create its own game engine - despite paying to use the Unreal Engine. All of this, if true, cost time, money, and lost profits. Don’t be surprised to see other developers jump on board with this lawsuit against Epic.

Why would Epic do this? Hmmm, well, according to SK, it’s as simple as three words. Click on to read more.

Gears of War

SK believes Epic intentionally delayed giving licensees the proper coding because it was prioritizing its development of Gears of War over its obligations to SK and other licensees. And for those who may not know, similar to our fearless leader here at Game Stooge (Derrick), Gears of War is kind of a big deal. It was the fastest selling 360 game since the 360’s launch and is continuing its spectactular run with upcoming releases on both the PC and Mac.

Although not explicitly stated, I think SK is suggesting that Epic did this so it could be the first to release a next-gen game with the most recent version of its Unreal Engine. Would competing games utilizing the Engine have hurt the sales and stature of Gears of War? Probably not, in my opinion. But, to be fair, we’ll never actually know - which is part of the reason SK is suing.

What SK does say is that Epic gained an “unfair advantage” in the industry over its competitors and at the expense of its licensees by prioritizing GoW. The Complaint specifically mentions E3 2006 in Paragraph 56 where GoW was universally praised by the gaming press and industry while SK’s Too Human was

“roundly criticized . . . for its technical problems and generally unpolished appearance. The damage . . . 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.”

This “vast” difference was, according to SK, due to the fact that Epic had failed to honor its contractual obligation to deliver a working Engine for the 360 by March of 2006.

Wrap-Up

So that’s the basis of the lawsuit. It’s wrapped into a very detailed 54 page Complaint (which is relatively uncommon). The later pages get into very specific detail about the Unreal Engine and what it does. But here are some parts most gamers may be interested in:

• Paragraphs 23-29: Good (general) explanations of how the video game industry works;
• Paragraphs 30-34: How game engines are developed and used in game production;
• Paragraphs 35-40: What the Unreal Engine is and how it became such an important part of the video game industry.

Those paragraphs are a quick read, so check them out. Here is a link to the .pdf of the Complaint. I found them interesting and informative and think most gamers will too. It was very interesting to see just how important these development factors are when game developers are considering demonstrating a game at a press event such as E3. It may even cause you to think twice about why some games aren’t put up for demonstration.

Damages

For the record, don’t put any weight on the $75,000 “amount in controversy” that’s in Paragraph 3 of the Complaint. Because SK is located in Canada and Epic is located in North Carolina, this lawsuit was filed in Federal court (as opposed to a state court). One of the requirements to be eligible for filing in Federal court, generally, is that you must allege damages (amount of money you are seeking) in excess of $75,000. So, the number is just in there to fulfill that requirement (the case would be thrown out if it wasn’t explicitly stated in the Complaint).

I’m sure the actual damages SK is seeking is well into the millions of dollars, probably tens of millions, as supported by Paragraph 21 which indicates that the time and effort SK put forth in creating its own game engine cost “millions of dollars in man-hours and potential profits.” So why doesn’t SK state exactly how much they want? Well, for many reasons. But for the most part: 1) They probably don’t really know yet, 2) They don’t want to bind themselves to a number for negotiation purposes.

We’ll keep tabs on this lawsuit, but don’t expect any big news for quite a while as lawsuits like this can take years to resolve. Also, remember that only around 5% of all lawsuits end up going to trial. So expect this case to quietly settle out of court at some point with no final word on if the allegations are actually true.