Silicon Knights, developer of the Blood Omen series as well as the upcoming Too Human have recently filed suit against Epic, creator of the super-mega-big-damn hit Gears Of War and the Unreal Tournament Engine 3 which powers it. SK claims that not only did Epic withhold enhancements and bug fixes for the licensed version of the UT3 engine from them, but it was done intentionally to give themselves an unfair advantage in the market.
At the crux of SK’s complaints is Epic’s contention that most of the enhancements and bug fixes requested by Silicon Knights were “game-specific” and not “engine-specific,” therefore it wasn’t Epic’s responsibility. Little niggling bits like a functional graphics renderer were therefore Silicon Knights’ problem. Meanwhile work continued on Gears Of War, work funded (according to the suit) by the licensing fees paid to Epic by Silicon Knights and other unnamed licensees.
All of this comes to a head at E3 2006, where Too Human and GOW, both games using ostensibly the same engine, are shown with vastly different reactions. Gears of War wowed audiences, going on to win Best game that year. Too Human, forced by Epic's neglect to run on an incomplete and broken engine, was roundly criticized as slow, buggy, and generally disappointing.
The solution was the creation of the “Silicon Knights Engine” (although company CEO Denis Dyack initially denied its existence) which will presumably be used in Too Human and all future Silicon Knights games. The lawsuit is unclear as to whether the SKE is wholly independent venture or a natural offshoot of the supposedly unusable code provided by Epic. The lawsuit seems to say both, and this distinction could be a major obstacle for Silicon Knights moving forward.
Silicon Knights seeks either a complete dissolution of their contract or significant modification, allowing SK to use and modify the UT3 engine as they see fit, with no further obligation to Epic. In addition, Silicon Knights seeks a total refund of all licensing fees paid to Epic in addition to all profits made from Gears Of War to date. Gears Of War has sold over 4 million copies since its release in November of 2006, making the potential payoff substantial for the struggling developer.
Dyack was lambasted for his criticism of the video game media and its supposed unfair coverage of Too Human at E3 2006. Perhaps this lawsuit gives more reasons behind his frustration. I recommend reading the actual lawsuit papers provided here in pdf form. It's longish (54 pages) but surprisingly free of a lot of legalese and gives a pretty good insight into the various back-room negotiations involved in the video game business as well some fairly technical details written for the layman.