Silicon Knights unloads property, closes office, continues battle with Epic Games

Too Human developer Silicon Knights, still battling a $4.45 million judgment that favored Epic Games, is down to just a few employees, has closed its office and has sold off office equipment and game assets, Polygon has learned.

Calls to the company went unanswered, as the phone number listed on Silicon Knights' website appears to have been disconnected. But the studio's chief financial officer, Mike Mays, tells Polygon that the few remaining Silicon Knights employees are "very busy" and the studio is "definitely alive."

The company laid off most of its employees last summer, a source tells Polygon. Around the same time, a core group of Silicon Knights employees, including founder Denis Dyack, created a new studio: Precursor Games.

Precursor Games, formed about 30 miles west of the now-empty offices of St. Catharines, Ontario-based Silicon Knights, also purchased some of Silicon Knights' assets, including art assets, desks, chairs and even computers, a move that spurred an examination by Epic Games attorneys, according to court records. The studio is attempting to fund development of Shadow of the Eternals, a spiritual successor to Eternal Darkness.

Silicon Knights has not filed for bankruptcy, according to David Smith, president and co-founder of Personal Bankruptcy Canada Inc.

Epic Games attorneys filed legal motions after Silicon Knights sold its computers to Precursor Games in July 2012, asking the company to verify that it had formatted all of its computers, ensuring that Silicon Knights' game engine and assets had not made their way over to the new company. According to a court document, those computers were all wiped clean before they were sold.

Polygon was able to confirm with local Ontario real estate agents that the three-floor office, once home to more than 100 employees, is empty and available to lease.

Shortly after announcing Precursor Games and its new project this week, Dyack returned to the Silicon Knights forums to confirm that he had left the company and was now the chief creative officer of Precursor Games.

"It has been a very long time," he wrote in the post. "I am sorry I was away so long, it was not intended and I truly regret that I could not interact more with you all. I wanted to do so but it simply was not an option for me at the time. I really hope you can understand.

"As most of you already probably have seen, I am no longer at Silicon Knights and I joined Precursor Games some time ago. I invite you all to join us at Precursor Games if you are so inclined. I will be interacting more there (our whole team will be — it is one of the principle [sic] pillars of the company) and I look forward to seeing what we can accomplish with the community and our crowd sourcing campaigns.

"I do see that some people are disappointed at the way things turned out, so was I and many others, believe me. However, rather then [sic] dwell on that, we are moving forward a positive direction that I hope you can also join."

Dyack declined to talk to Polygon about Silicon Knights, saying that "we want to concentrate on forward looking news and Precursor Games focused things only ... "

"We are simply trying to turn a tough situation into something positive."

Precursor Games CEO Paul Caporicci told Polygon that Precursor has no relationship with Silicon Knights, but did verify that new studio purchased some of the old studio's equipment.

"Silicon Knights was selling off extra assets to laid-off employees and we, along with others, purchased some of them," Caporicci said. "Like so many others who have been laid off in this difficult economy, we are simply trying to turn a tough situation into something positive. This helps gives us an opportunity with Shadow of the Eternals to give the gamers something that have been wanting."

Caporicci referred us to Mays for further inquiries about the state of Silicon Knights.

After his initial email telling Polygon that Silicon Knights was still "alive," Mays did not respond to questions about where the studio was now based, if it had office equipment, how many employees it had or what games it was working on.

Silicon Knights was founded in 1992. Its early titles, released through Strategic Simulations Inc., were developed for DOS, Atari ST and Amiga computers. The studio moved on to console development with Blood Omen: Legacy of Kain, and collaborated with Nintendo to release Eternal Darkness: Sanity's Requiem and an adaptation of Metal Gear Solid for Nintendo GameCube.

The studio's 2008 release, Too Human for Xbox 360, was originally planned for release on PlayStation in 1999 and later on GameCube. According to Dyack, after Silicon Knights parted ways with Nintendo, it engaged Microsoft to develop the game on Epic Games' Unreal Engine 3.

"We looked at it and it was like, this is such an awesome engine with great technology that it will allow us to concentrate even more on content, which is our strength," Dyack said in a 2005 Gamasutra interview. "The technology is built-in. We're going to change the technology a lot. We've been a tech house and done our own tech, and the tech group has been modifying the engine. Epic's been very supportive."

Silicon Knights would later go on to sue Epic Games over Unreal Engine 3, alleging that Epic failed to provide Silicon Knights with a working game engine while also "sabotaging efforts by Silicon Knights and others to develop their own video games." Epic later successfully countersued and was awarded $4.45 million in a judgment. As a result, Silicon Knights was ordered to destroy all copies of Too Human and X-Men Destiny, as well as in-development games The Sandman, Siren in the Maelstrom and The Box/Rytualist. Silicon Knights recently filed a new appeal in that case.

During the development of Too Human and other unreleased titles, Silicon Knights received about $4.5 million in funding from various Canadian programs.

In 2008, prior to the release of Too Human, Silicon Knights received funding from Ontario's provincial government. Its Media Development Corporation (OMDC) granted $1 million as part of its Video Game Prototype Initiative for Silicon Knights and London, Ontario-based Digital Extremes to split. In an announcement of the fund, Silicon Knights was said to be working on a third-person action/psychological thriller for release in 2010 on "all next-generation platforms."

The developer was also a recipient of the OMDC's export fund for Interactive Digital Media in 2007 and 2008. The annual award funds up to $12,000 toward development costs.

In 2010, Silicon Knights received "nearly $4 million" as part of a loan backed by Ontario's Federal Economic Development Agency. Money from that loan was intended to be put toward development of a "new AAA video game that will appeal to a mass gaming market" and create more than 65 new jobs. The loan was expected to be repaid sometime this year.

When Polygon contacted Rick Dykstra, a Member of Parliament who promoted that repayable loan, a representative said, "We have no comment about Silicon Knights. Thank you," and then quickly hung up. A follow-up email to Dykstra requesting details about the payback of that loan received no response.

Silicon Knights was also the recipient of funding from Ontario's Ministry of Economic Development, Trade and Employment, promoted as an effort to create 80 new jobs and protect 97 existing positions. The money was also planned to be utilized in the creation of a 3D game development engine that would include "new advanced camera systems, improved audio and video and better computing technology," and enable Silicon Knights to self-publish its titles.

According to Denis Dyack and Ministry of Economic Development and Innovation officials, Silicon Knights never received any of that money. Officials said the developer failed to meet certain goals of the conditional funding, which Dyack contested.

It's unclear how much money Silicon Knights owes the Canadian government, as officials declined to disclose what remains to be paid.

"Precursor Games has no connection to Silicon Knights."

Just because Precursor Games seems to have been constructed out of some of the remnants of Silicon Knights, including office equipment, art and employees, doesn't mean that it can be held liable for Silicon Knights' debts, bankruptcy expert Smith said. Anyone seeking money from Precursor for Silicon Knights' debts, including Epic if Silicon loses the appeal, would have to file a new case in court.

Attorneys, he said, would have to prove that there was evidence of a link between the two companies.

Caporicci stressed to Polygon that Precursor "has no connection to Silicon Knights."

"We are a completely separate and independent entity and always have been," Caporicci said. "Precursor is not and never has been a party to that case, and is not involved in it whatsoever. We purchased completely wiped clean machines, that is all. There is no basis for any liability or any claim against Precursor Games.

"We wish Silicon Knights the best of luck in their future."

Michael McWhertor and Tracey Lien contributed to this report.