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Silicon Knights Suffers Setback In Suit Against Epic

Silicon Knights Suffers Setback In Suit Against Epic

December 28, 2011 | By Eric Caoili

Silicon Knights suffered a setback in its lawsuit against Epic Games after a judge granted a motion to exclude the reports and testimony of an analyst that was key to the developer's case.

Financial analyst and accountant Terry Lloyd argued that problems with Epic's Unreal Engine 3 licensing and functionality caused more than $58 million in damages to Silicon Knights, but the court's decision dismisses any effect his points could have had on the suit.

Ontario-based Silicon Knights brought in Lloyd to offer an expert opinion on damages caused by alleged issues with Unreal Engine 3, which the developer claims caused the two-year delay and low sales of its 2008 game Too Human for Xbox 360.

The firm filed its lawsuit in 2007 and said Epic failed to provide a functional version of Unreal Engine 3. Epic responded by filing a countersuit, denying that it promised to deliver "fully-operational version" of the engine within six months of the Xbox 360's launch.

Silicon Knights insisted that "during the parties' license-agreement negotiations, Epic made false representations concerning the license agreement and the functionality of UE3," according to court documents obtained by The Escapist.

It also said the deal "caused decreased sales of Too Human, caused [publisher] Microsoft to end negotiations to develop two sequels... damaged Silicon Knights reputation, and impaired Silicon Knights' ability to secure future development projects."

Lloyd based his estimate of over $58 million in damages on lost royalties, publisher bonuses, and profits from potential sequels and future projects, as well as on the studio's cost to develop a new engine for Too Human and the economic harm caused to its reputation.

Epic countered by describing Lloyd as unqualified and filing a motion to exclude his testimony, calling his estimates "unreliable," "speculative," "made up," and "uninformative guesses." It further argued that the analyst's methodologies "do not fit the facts of the case."

North Carolina chief district judge James Dever III agreed, finding issue with how Lloyd calculated potential sales for Too Human, and the value of the rejected projects Silicon Knights was negotiating with companies like Capcom, THQ, Vivendi, Namco, and Sega.

This latest upset comes just a few months after Silicon Knights laid off more than half of its employees after one of its unannounced projects was cancelled "at the final second."

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