Breaking: Silicon Knights Files Lawsuit Against Epic

[archangelmorph]

Or maybe, just maybe UE 3.0 (being an engine built from the ground up as a dedicated PC engine) we never really ready for consoles from the off..?

I think it's probably a little more reasonable to assume that Epic did a half ass job of porting the engine to console initially (so they could get the licenses out in time, since the engine practically had to be ready to ship with both the 360 and PS3 dev licenses) due to heaily constrained schedule and hope for the best with respect to working out all the kinks and optimising later..

Problem was they didn't realise that to properly optimise for the console much of the engine would have to be completely re-done and by the time they were about to develop and test such significant changes, too many developers had already licensed the engine and had been waiting on Epic for fixes which ultimately affected there own development schedules..

The PS3 ver. being even more removed from the original PC based solution would then taken even longer, especially considering Epics lack of resources to devote to it (since they were all tied up dealing with Gears and UT2007)...

To me it sounds like Epicare only guilty of jumping the gun and licensing and engine too early for platforms it clearly wasn't ready for..

 

[dlm]

I'm surprised to see so little discussion on the allegation that Epic diverted funds from engine licensing fees to Gears of War development.

That's an extremely serious accusation. Depending on the contract wording, that could fall legally into the range of cooking the books on top of screwing their licensees.

This is what happens when one company is designing the platform and the software. Microsoft has been there, I'm surprised other people haven't learned their lesson from that by now.

 

[dobwal]

I'm surprised to see so little discussion on the allegation that Epic diverted funds from engine licensing fees to Gears of War development.

That's an extremely serious accusation. Depending on the contract wording, that could fall legally into the range of cooking the books on top of screwing their licensees.

This is what happens when one company is designing the platform and the software. Microsoft has been there, I'm surprised other people haven't learned their lesson from that by now.

I fail to see how you consider this as illegal. Developers pay licensing fees for the use of U3E, the licensing fees are basically revenue to be used as Epic see fit. I doubt the contracts contains language on how the licensing fees should be used as the developer aren't paying for development but for the use of the engine.

 

[Eleazar]

I think SK is going to have a lot of problem proving the intent statute part of the malicious business practices. They for sure might be able to prove harm was done by Epic but proving they intended to do harm is entirely different. A lot of this could just be relegated to negligence and incompetence rather than outright malicious intent. I think if they are able to subpoena records it would go miles to help prove/disprove Epic's innocence. Right now they don't have one shred of evidence to help prove the malicious intent of Epic's action. They do have evidence that Epic did not keep to all of the agreements in the contract. It would also help out if we could actually read the contract SK had with Epic. Then we could actually determine what Epic was and was not responsible for. I am looking forward to hearing more as this case unfolds. Especially to see if a court date is ever scheduled or if both parties just decide to "make a deal". SK most certainly has a compelling argument for the damage done to them. This could get really bad for Epic if other discontent licensee's are able to corroborate Epic's allegedly malicious business practices. SK might be able to prove the failure of Epic to meet contractual agreements but the intent needs evidence.

Did anyone read the prayer section. The part about Epic forfeiting all of their profits on Gears of War is just lofty and an injustice. I do think if they are found guilty a hefty sum of money equal to the amount of damages SK is able to prove in court and full rights to their current engine is not out of the question.

I think one thing is for sure in this case, Epic probably could have done a better job in supporting their licensee's, as SK is not the only one to have difficulties. The part of the document which describes Epic only have 75 employees to develop Unreal 3(the game), Gears of War, PS3 engine, X360 engine, and support licensees does speak to SK's credit if true. There are also a couple of quotes they threw in there from Mark Rein which end up allegedly false. You can be sure that if Epic did an adequate job supporting their product, there would not be a lawsuit from SK.

Lastly, the Epic history gave me a few chuckles throughout the whole section. That has to be one of the most biased things I have ever read. You can tell whoever wrote that was just sick to their stomach with Epic's alleged actions.

 

[Eleazar]

I fail to see how you consider this as illegal. Developers pay licensing fees for the use of U3E, the licensing fees are basically revenue to be used as Epic see fit. I doubt the contracts contains language on how the licensing fees should be used as the developer aren't paying for development but for the use of the engine.

Included in the contract would have been a clause specifying the kind of support Epic was to offer. In fact, just by reading the .pdf we know such a clause exists because there is some debate between Epic and SK as to what qualifies as engine specific and game specific for support. If Epic used licensee's fees to support their own engine while ignoring the agreement outlined in the contract to make the UE3 licensed engine "commercially viable" for SK, this would be scandalous. This is one of the conundrums of licensing a product from a company that is a direct competitor of you. It is just asking and begging human nature to kick in and take advantage of you. It requires you to have a lot of trust in the competing company to have a high standard of ethics. Especially when the agreement is advantageous to that competing company if they had malicious intentions.

Just from looking at the .pdf, it seems neither party explicitly defined what is engine specific and game specific in the contract. It would really help if we could read what is contained in this contract.

As far as the contract containing language that defines how much money is allocated to the development of the engine, I doubt this as well. The contract however would have contained language to define what support Epic is to provide. If it does not, then this is going to be a very difficult case for SK. As I said though, just by reading the .pdf it seems that it in fact did. The contention is where that line is drawn.

 

[ShootMyMonkey]

Or maybe, just maybe UE 3.0 (being an engine built from the ground up as a dedicated PC engine) we never really ready for consoles from the off..?

I think that much has been established for quite some time. As has been said, the attraction to Unreal Engines has always been the tools. And among the really brilliant marketing moves they've done is open those up to the modding community with past versions. That means that there is a wellspring of content-creation/scripting talent who already know their way around Unreal. I can't say I've heard of it being popular among programmers, but of course programmers are relatively willing to deal with anything however begrudgingly. UE3 is supposedly an improvement over prior versions in that respect, but still largely the same idea.

To me it sounds like Epicare only guilty of jumping the gun and licensing and engine too early for platforms it clearly wasn't ready for..

I would think the same. Software in general is not the sort of thing you can make timeline promises about. You'll never meet them. And Silicon Knights could theoretically sue for breach of contract (and I'm not entirely surprised that it's SK, of all UE3 licensees, who are rattling their sabers), but that's hardly the same thing as "sabotaging" their licensees. Sabotaging implies some sort of active effort on Epic's part to harm others, which seems rather silly.

 

[dobwal]

Included in the contract would have been a clause specifying the kind of support Epic was to offer. In fact, just by reading the .pdf we know such a clause exists because there is some debate between Epic and SK as to what qualifies as engine specific and game specific for support. If Epic used licensee's fees to support their own engine while ignoring the agreement outlined in the contract to make the UE3 licensed engine "commercially viable" for SK, this would be scandalous. This is one of the conundrums of licensing a product from a company that is a direct competitor of you. It is just asking and begging human nature to kick in and take advantage of you. It requires you to have a lot of trust in the competing company to have a high standard of ethics. Especially when the agreement is advantageous to that competing company if they had malicious intentions.

Using licensing fees to fund your own game develop is not inherently unethical and is an irrevelant point. Even if Epic earmarked all licensing fees to be used only as a resource for engine development but still intentionly delayed its release to give an advantage to Gears, this is still more damaging then Epic allocating revenue from licensing fees to both development of Gears and U3E but unintentionly missing release dates given in the contract with SK.

The question is whether Epic missed the release date with the intention to harm SK and other developers to give an advantage to Gears and not how licensing fees were spent.

If Epic had allocated all the revenue from licensing into Gears' development and still made the deadlines, there would be no suit from SK.

 

[scooby_dooby]

Using licensing fees to fund your own game develop is not inherently unethical and is an irrevelant point. Even if Epic earmarked all licensing fees to be used only as a resource for engine development but still intentionly delayed its release to give an advantage to Gears, this is still more damaging then Epic allocating revenue from licensing fees to both development of Gears and U3E but unintentionly missing release dates given in the contract with SK.

The question is whether Epic missed the release date with the intention to harm SK and other developers to give an advantage to Gears and not how licensing fees were spent.

If Epic had allocated all the revenue from licensing into Gears' development and still made the deadlines, there would be no suit from SK.

To me, the question is not one of revenue, but manpower.

Epic is a very small dev house, 75 people or so I believe. If they had to pull team members off of the engine team, in order to ship GOW on time, not only are they going to run behind schedule on the UE3 engine enhancements, but also give their own game an unfair advantage by delaying the shipments of competing titles.

Now even if this is not an intentional sabatoge, it's still very unethical behaviour. The right thing to do would be to either hire more additonal people for the GOW team, without impacting the UE3 team. Or, if that's not possible for some reason, then delay Gears of War.

Supposedly Epic had 1/3 of their members working on the engine, 25 programmers over the last 2 years. You gotta wonder what all those guys were doing over all this time, and where their programming hours were actually spent.

 

[Eleazar]

Using licensing fees to fund your own game develop is not inherently unethical and is an irrevelant point.

Good, we both agree, because I never said such a thing, nor implied it.

Even if Epic earmarked all licensing fees to be used only as a resource for engine development but still intentionly delayed its release to give an advantage to Gears, this is still more damaging then Epic allocating revenue from licensing fees to both development of Gears and U3E but unintentionly missing release dates given in the contract with SK.

So you agree with what I said, as I only said the former was scandalous. I never claimed Epic would be wrong for using licensing fees to fund the development of Gears. In fact it seems complimentary that they would do this, as development on Gears would aid the development of the UE3 engine to a degree, and thus allow them to provide updates to the UE3 engine.

The question is whether Epic missed the release date with the intention to harm SK and other developers to give an advantage to Gears and not how licensing fees were spent.
If Epic had allocated all the revenue from licensing into Gears' development and still made the deadlines, there would be no suit from SK.

Possibly, it sounds like SK is also thoroughly displeased with the support they received from Epic from reading that .pdf. It was one of the things the .pdf implies they brought to Epic's attention and they allegedly only provided baseless excuses.

 

[dobwal]

To me, the question is not one of revenue, but manpower.

Epic is a very small dev house, 75 people or so I believe. If they had to pull team members off of the engine team, in order to ship GOW on time, not only are they going to run behind schedule on the UE3 engine enhancements, but also give their own game an unfair advantage by delaying the shipments of competing titles.

Now even if this is not an intentional sabatoge, it's still very unethical behaviour. The right thing to do would be to either hire more additonal people for the GOW team, without impacting the UE3 team. Or, if that's not possible for some reason, then delay Gears of War.

Placing priority of one product over another product is not unethical. Epic is just as responsible for meeting the Gear deadlines agreed upon with MS as it is for meeting the deadlines agreed upon with licensees of U3E. Intent is very important part of the lawsuit filed by SK as it isn't just missing a deadline that infuriated SK, it was missing the deadline while having a fully functional engine available for use only on Gears (a belief that SK holds).

Missed deadlines happen all the time and most don't warrant lawsuits as they are amicable worked out.

 

[dobwal]

Good, we both agree, because I never said such a thing, nor implied it.

So you agree with what I said, as I only said the former was scandalous. I never claimed Epic would be wrong for using licensing fees to fund the development of Gears. In fact it seems complimentary that they would do this, as development on Gears would aid the development of the UE3 engine to a degree, and thus allow them to provide updates to the UE3 engine.

If Epic used licensee's fees to support their own engine while ignoring the agreement outlined in the contract to make the UE3 licensed engine "commercially viable" for SK, this would be scandalous. .

I took from your statement that own engine implied the "Gears specific engine" It would be hard for me to believe that Epic while reinvesting all the revenue generated from licensing fees back into the general U3E development had the intention of ignoring their agreement with their licensees.

Either that or you assume that Epic builds game specific or Internal use only engines and port them into builds for commercial use. I assume the opposite that Epic builds a general engine for commercial use and optimizes them for specific platforms and then for specific games on those platforms.

 

[archangelmorph]

I would think the same. Software in general is not the sort of thing you can make timeline promises about. You'll never meet them. And Silicon Knights could theoretically sue for breach of contract (and I'm not entirely surprised that it's SK, of all UE3 licensees, who are rattling their sabers), but that's hardly the same thing as "sabotaging" their licensees. Sabotaging implies some sort of active effort on Epic's part to harm others, which seems rather silly.

Exactly..

Personally I find it most unsual that SK would even consider such an idea especially when both companies are not completely "competing" in the same space..

They're both publishing their games under MSG [for the same platform] for pete's sake!

I'm not sure why MS doesn't get involved and try to help the situation, it would probably be in their interests since this fiasco could be affecting their own image..?

 

[Platon]

I would also find it strange that Epic intentionally would sabotage SK or any other licensee, and most likely as others have said they just got maybe a bit greedy/overexcited and licensed an engine that was not ready yet, to way too many devs.

I have no clue how SK could prove intention or not by Epics part but on the other hand do they really need to? To them, whether Epic intentionally or unintentionally delayed the complete UE3, the damage was done regardless.

To me this lawsuit has several points of which some can be proven while others not.

1) Delay of the engine. I think this part is in favor for SK, as final, both xbox360 and PS3 specific, UE3 code was not delivered on time.

2) Bad support. This one could go either way, maybe with a slight tip to SK.

3) Money obtained from licensees was used for GoW. This is not illegal, however, if they have agreed on a certain support, of which SK feels they didn't get any, they might have a case as it can be argued, that the money the licensees have paid should be used primarily for supporting the engine and Epic should have hired other people if they had to finish GOW or for other game specific purposes. I see this point can be quite hard for SK though.

4) Intentional sabotage by Epic. As I have not read the lawsuit yet and do not know all the details, I do not know it this is an actual point or not. To me though it looks almost impossible to prove, however, as I said above, I do not know if they really have to as the damage is done regardless...

 

[Scott_Arm]

...
3) Money obtained from licensees was used for GoW. This is not illegal, however, if they have agreed on a certain support, of which SK feels they didn't get any, they might have a case as it can be argued, that the money the licensees have paid should be used primarily for supporting the engine and Epic should have hired other people if they had to finish GOW or for other game specific purposes. I see this point can be quite hard for SK though.

4) Intentional sabotage by Epic. As I have not read the lawsuit yet and do not know all the details, I do not know it this is an actual point or not. To me though it looks almost impossible to prove, however, as I said above, I do not know if they really have to as the damage is done regardless...

I can see SK using point 3 to try to prove point 4. If Epic used licensing fees to complete their own game rather than live up to their contractual obligations with licensees, SK could argue they were being scammed into funding someone else's product.

 

[inefficient]

1) Delay of the engine. I think this part is in favor for SK, as final, both xbox360 and PS3 specific, UE3 code was not delivered on time.

I expect Epic will argue that their licensing agreement was based on the contents of the engine at the time of licensing. Naturally, as with all previous Unreal licenses, licensees are entitled to all future code enhancements. They will drive the point home that they are "enhancements" to the engine and not a core deliverable. Unless it was a very foolishly written contract, the legally binding deliverables should be fully limited to what was actually available at start of the contract.

Because I'm quite confident the contract on paper was not written by idiots (epic has a lot of experience with this) it should be quite in their favor. I believe SK will argue that the "enhancements" they were entitled to were a key selling point of the whole contract itself. And that they were deceived into a bad purchase based on deception. Or they could do some thing desparate and try to claim there was an unwritten verbal agreement between the companies for specific deliverables. In some situations verbal agreements can be legally binding.

Again, contrary to what SK is implying, I strongly doubt the renderer update was an actual time based deliverable in the actual contract. Do people really think Epic would have put in to the contract promising X triangle rate X shader throughput etc etc? Renderer performance is very hard to quantify. I don't even think SK could legally prove in court the initial renderer was not sufficient to make a game.

2) Bad support. This one could go either way, maybe with a slight tip to SK.

They should only be held responsible to answer questions about the engine code they supplied. Not answering questions like "how do I do this better" or "how can I change your engine so that I can do X" or "how do I make X run faster" would easily be out of scope.

3) Money obtained from licensees was used for GoW. This is not illegal, however, if they have agreed on a certain support, of which SK feels they didn't get any, they might have a case as it can be argued, that the money the licensees have paid should be used primarily for supporting the engine and Epic should have hired other people if they had to finish GOW or for other game specific purposes. I see this point can be quite hard for SK though.

4) Intentional sabotage by Epic. As I have not read the lawsuit yet and do not know all the details, I do not know it this is an actual point or not. To me though it looks almost impossible to prove, however, as I said above, I do not know if they really have to as the damage is done regardless...

Those are the points that really makes their case loose any credibility in my book. Their wording was that they want to "disengorge" the profits Epic made off of gears because it was made at their expense. It makes it look like a desperate grab for someone else's money. And implying that there was some sort of sinister conspiracy is a bit of a leap of logic and I don't think it will go over well in court.

 

[dlm]

I took from your statement that own engine implied the "Gears specific engine" It would be hard for me to believe that Epic while reinvesting all the revenue generated from licensing fees back into the general U3E development had the intention of ignoring their agreement with their licensees.

Either that or you assume that Epic builds game specific or Internal use only engines and port them into builds for commercial use. I assume the opposite that Epic builds a general engine for commercial use and optimizes them for specific platforms and then for specific games on those platforms.

Although the latter is the only way to keep out of hot water, the allegations of the case are that Epic did the former.

The fact that they later opened up the Gears stuff seems to support this, but I imagine that nobody here that can talk about it would be able to say for sure.

Using code that you wrote as a platform is much more specific than "we wrote one bit of code, then wrote another bit of code that uses it." When it's your code, you are equipped to do things that other developers are not. Although Epic is too small to get hit with antitrust for it, if that's what they did, it's no different than what MS got slammed for in the 90's.

If it's proven in addition to that that they missed their obligations to their licensees because they were diverting resources to Gears development, it would certainly have a huge negative impact on their credibility. Plus it'd be pretty despicable and they'd deserve to get nailed to the wall for it.

But again, there's a lot we don't know. It's as likely as not that there'll be a settlement and this will all get swept under the rug. I'd be shocked if we ever really know anything.

 

[dobwal]

Although the latter is the only way to keep out of hot water, the allegations of the case are that Epic did the former.

The fact that they later opened up the Gears stuff seems to support this, but I imagine that nobody here that can talk about it would be able to say for sure.

Using code that you wrote as a platform is much more specific than "we wrote one bit of code, then wrote another bit of code that uses it." When it's your code, you are equipped to do things that other developers are not. Although Epic is too small to get hit with antitrust for it, if that's what they did, it's no different than what MS got slammed for in the 90's.

If it's proven in addition to that that they missed their obligations to their licensees because they were diverting resources to Gears development, it would certainly have a huge negative impact on their credibility. Plus it'd be pretty despicable and they'd deserve to get nailed to the wall for it.

But again, there's a lot we don't know. It's as likely as not that there'll be a settlement and this will all get swept under the rug. I'd be shocked if we ever really know anything.

There is nothing wrong with putting one project's priority over another. Epic also has a contract with MS regarding Gears and is obliged to meet those deadlines as it is obliged to meet deadlines regarding U3E.

Its one thing to say "lets throw the majority of the team at getting Gears out the door as its is more important" and then subsquent actions lead to the delay in the release of a fully working U3E.

Its another thing to "lets hold back the engine's full functionality and all optimizations from the Gears development from our licensees so that we will get a leg up at E3 2006 and this Christmas holiday" and then subsquent actions lead to the delay in release of a fully U3E.

The actions of both situations can be totally the same, but its the intent that will increase the damage to Epic's reputation and bottom line if SK fully proves its case.

 

[Scott_Arm]

There is nothing wrong with putting one project's priority over another. Epic also has a contract with MS regarding Gears and is obliged to meet those deadlines as it is obliged to meet deadlines regarding U3E.

Its one thing to say "lets throw the majority of the team at getting Gears out the door as its is more important" and then subsquent actions lead to the delay in the release of a fully working U3E.

Its another thing to "lets hold back the engine's full functionality and all optimizations from the Gears development from our licensees so that we will get a leg up at E3 2006 and this Christmas holiday" and then subsquent actions lead to the delay in release of a fully U3E.

The actions of both situations can be totally the same, but its the intent that will increase the damage to Epic's reputation and bottom line if SK fully proves its case.

Was there a legal obligation for Epic to release Gears by a certain date? If they had a legal obligation to release certain deliverables to SK, and missed that date so they could release Gears earlier, without any legal obligation to do so, that could be very bad. Developers seem to miss game release dates all the time, so I'm assuming they aren't legally bound to releasing a game by a certain date.

 

[dobwal]

Was there a legal obligation for Epic to release Gears by a certain date? If they had a legal obligation to release certain deliverables to SK, and missed that date so they could release Gears earlier, without any legal obligation to do so, that could be very bad. Developers seem to miss game release dates all the time, so I'm assuming they aren't legally bound to releasing a game by a certain date.

Im sure it is a standard practice that contracts involving game development have time stipulations in them.

 

[dlm]

There is nothing wrong with putting one project's priority over another. Epic also has a contract with MS regarding Gears and is obliged to meet those deadlines as it is obliged to meet deadlines regarding U3E.

Its one thing to say "lets throw the majority of the team at getting Gears out the door as its is more important" and then subsquent actions lead to the delay in the release of a fully working U3E.

Its another thing to "lets hold back the engine's full functionality and all optimizations from the Gears development from our licensees so that we will get a leg up at E3 2006 and this Christmas holiday" and then subsquent actions lead to the delay in release of a fully U3E.

The actions of both situations can be totally the same, but its the intent that will increase the damage to Epic's reputation and bottom line if SK fully proves its case.

While Epic certainly has the ability to make a choice of how they prioritize their obligations, if they had the resources to deliver on their contract with SK and chose an allocation that prevented them from doing so, it gives SK's lawyers the chance to say that Epic drew the contract with SK in bad faith, which is fair more damning than a good faith contract that they failed on.

I also never said that their resource allocation is the same thing as the charge that they deliberately held back code under the guise of it being "game-specific". Obviously those are two separate things, and Epic is suing them for both.

Whether or not it is strictly illegal for Epic to use money paid to them by licensees unethically is immaterial. If they did so, it goes a long way towards SK being able to show intent. It is also their lever for going after Gears profits, which is a long shot, but if the rest of SK's case was proven, they'd have a case to do it.

SK is obviously trying to prove that Epic's intent from day one was a malicious money grab against their licensees. The division and wording of the charges, even in cases where specific behaviors are not necessarily illegal, are all parts of the case that SK is building.