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Section 8 developer TimeGate Studios files for bankruptcy protection

Michael McWhertor is a journalist with more than 17 years of experience covering video games, technology, movies, TV, and entertainment.

TimeGate Studios, the Sugar Land, Texas-based developer of Section 8 and co-developer of Aliens: Colonial Marines, filed a petition for Chapter 11 bankruptcy protection in Texas Southern Bankruptcy Court on Wednesday, according to court documents obtained by Polygon.

The petition filed by TimeGate lists less than 50 creditors owed money by the game developer and total liabilities ranging from $10 million to $50 million. TimeGate's top creditors include companies like Unreal Engine developer Epic Games, online game service Agora Games and transmedia developer DJ2 Entertainment. Creditors listed in court documents also include a local pizzeria, to whom TimeGate owes $34.80, and video game agency Birthplace Management Group, which is owed $20,539.20.

Also listed among TimeGate's chief creditors is Southpeak Interactive, publisher of the original Section 8, which is owed an "unknown" amount in a claim, but it is likely its most substantial liability. TimeGate Studios faces $7.35 million in damages and the loss of the Section 8 license as part of a fraud suit between itself and SouthPeak.

TimeGate sued Southpeak in 2009, claiming it had withheld royalties and failed to follow through with its responsibilities for localizing Section 8. SouthPeak countersued, 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.

In April, a 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.

TimeGate Studios announced its current video game project, the blocky, minimalist PC shooter Minimum, in April. The developer's most recent release, the Gearbox co-developed Aliens: Colonial Marines, was recently the subject of a class action suit that alleged the game was falsely advertised.

Polygon left a message with TimeGate Studios seeking comment and will update with any information the developer offers.