A federal court said on March 24 that Silicon Knights and Epic Games will be able to bring their claims and counterclaims before a jury.
Too Human developer Silicon Knights called the ruling a "victory," according to a report on Kotaku.
The Canadian developer, which licensed Epic's Unreal Engine 3 for the 2008 action-RPG Too Human, filed suit against Epic in 2007, claiming that the company had not provided a functional version of the engine as allegedly agreed upon.
Epic later filed a countersuit saying the contract did not promise a "fully-operational version" of the engine within six months of the Xbox 360's original launch, as Silicon Knights claimed.
Silicon Knights had also alleged that Epic placed its own internal projects such as the UE3-powered Gears of War ahead of the needs of its engine licensees, in effect "sabotaging" competitors.
The court said in the latest filing, "...Epic had a possible motive to deceive SK into entering into the License Agreement in order to fund the development costs of its own games and delay the work of SK and other competing licensees on their video games."
Silicon Knights said that in mid-development of Too Human, it switched from using UE3 to creating its own game engine. But Epic's countersuit claimed Silicon Knights was trying to use UE3 and not pay engine licensing fees.
Silicon Knights also said that other UE3 licensees had serious issues with the engine. Since the engine's debut, it has powered many external games including Mirror's Edge, BioShock, Batman: Arkham Asylum and others.
Epic Games told Gamasutra in a statement that while a judge said the case will go to trial, the court also sided with Epic on certain aspects of the case.
"The court entered judgment in favor of Epic on several claims, rejecting Silicon Knights' claims that it could cancel its license agreement, that Epic interfered with its contractual relationships with publishers, and that Epic has acted unjustly under the license," the statement said.
Epic also downplayed what Silicon Knights categorized as a "victory," adding, "The court did not rule on the merits of Silicon Knights' remaining claims."
"The court was not permitted to judge the credibility of witnesses or evidence, or otherwise take into account Epic's opposing evidence, and therefore merely acknowledged that, under the rules of civil procedure, it had to allow a jury to consider both sidesí evidence on the remaining claims."
Epic claimed that the court's decision to put the case before a jury is not a sign that the judge finds merit in Silicon Knights' claims, rather the "court simply concluded that the disputed evidence should be heard and resolved by the jury."
Epic pointed out that the court had previously rejected Silicon Knight's request to dismiss Epic's counterclaims, which will also be placed before the jury. The Gears of War house alleges Silicon Knights "breached its license agreement, stole Epicís technology and infringed Epicís copyrights."
"Epic remains confident that it will be fully vindicated at trial," the statement added.
But Silicon Knights president Denis Dyack is equally confident. "When Epic first went public about our case to the press, they said that our claims were without merit," he said in a statement. "Two separate federal court judges have now disagreed with Epic, and have ruled that the case does have merit."