[4] Epic Games won the case and a counter-suit for $4.45 million on grounds of copyright infringement, misappropriation of trade secrets, and breach of contract.

In 2000, Silicon Knights was signed by Nintendo to create games exclusively for its consoles, during which time it produced Eternal Darkness: Sanity's Requiem.

Silicon Knights claimed that Epic not only missed this deadline, but that when a working version of the engine was eventually released, the documentation was insufficient.

[14] Furthermore, Epic claimed the Canadian developer broke the contract by employing this derivative work in an internal title and a second game with Sega,[15] a partnership for which it never received a license fee.

[16] On May 30, 2012, Epic Games prevailed against Silicon Knights' lawsuit, and won its counter-suit for $4.45 million on grounds of copyright infringement, misappropriation of trade secrets, and breach of contract,[5] an injury award that was later doubled due to prejudgment interest, attorneys' fees and costs.

"[17] Evidence against Silicon Knights was "overwhelming", said Dever, as it not only copied functional code but also "non-functional, internal comments Epic Games' programmers had left for themselves.

In addition, the studio was instructed to recall and destroy all unsold retail copies of games built with Unreal Engine 3 code, including Too Human, X-Men Destiny, The Sandman, The Box/Ritualyst, and Siren in the Maelstrom (the latter three titles were projects never released, or even officially announced).

[19] In February 2008, Silicon Knights was granted $500 thousand by the Ontario Media Development Corporation (OMDC) through its Video Game Prototype Initiative.

[21] In July 2011, Silicon Knights was awarded $2.5 million to be distributed over five years in provincial funding to improve its technology, create new products and become a self-publishing company.