TimeGate loses court appeal, faces $7.3M in damages in Section 8 suit

TimeGate Studios, developer of Section 8 and co-creator of Aliens: Colonial Marines, faces $7.35 million in damages and the loss of the Section 8 license following an appeal of a fraud suit between themselves and publisher SouthPeak Interactive, Polygon has learned.

TimeGate staff met yesterday to discuss the future of the company and its recently announced project, Minimum, in light of the decision, a source familiar with the matter told Polygon today.

The legal struggles between TimeGate and SouthPeak began in 2009, when TimeGate sued the publisher, claiming it had withheld royalties and failed to follow through with its responsibilities for localizing Section 8. SouthPeak filed a countersuit, claiming TimeGate hadn't invested enough of its own capital into the game's development, among other complaints. The two entered into arbitration with a third party, who ruled in favor of SouthPeak, awarding them $7.35 million in compensatory damages and full control of the Section 8 license — a decision which was overturned last March in a federal court.

Last week, the U.S. Court of Appeals for the Fifth Circuit filed a decision to reverse and remand the prior federal ruling with instructions to reinstate the arbitration award for SouthPeak. Barring further appeals, this would mean TimeGate faces the steep $7.35 million in damages, as well as the loss of its Section 8 IP.

The decision was handed down April 9 — the same day that TimeGate revealed Minimum, its upcoming multiplayer shooter which features multiple competitive modes and minimalistic graphics. The news also comes one month after TimeGate laid off around 25 of its employees, according to a Polygon source.

We have reached out to TimeGate to find out how the court's decision, and its resultant damages, will affect the studio's plans for its future.