Crytek v. Cloud Imperium Games

Crytek GmbH v. Cloud Imperium Games Corp and Roberts Space Industries Corp was a lawsuit brought by Crytek for copyright infringement and breach of contract.

The lawsuit was based on the General Licence Agreement (GLA) that both parties signed, with Crytek asking for direct and indirect damages as well as a permanent injunction against further use of the CryEngine in any Star Citizen or Squadron 42 materials.^[1] Crytek did not attach the General License Agreement to its complaint, which CIG later called deliberately ommiting and hiding, to which Crytek answered it had no obligation to do so and that it contained sensitive business information. The GLA was attached to the lawsuit by CIG.

The lawsuit lasted from December 12th 2017 to March 2020 and ended as a dismissal with prejudice, meaning that the claims won't be able to be raised again.^[2]

Crytek Claims

Breach of contract then copyright infringement over license to use CryEngine to make one game, not two

Crytek claimed that CIG was only given permission to make one game with CryEngine, Star Citizen, not two, Star Citizen and Squadron 42. However the GLA specifies granting the license to use CryEngine for "the game currently entitled Star Citizen and it's related space fighter game Squadron 42".^[3] In addition, the Game in the GLA is defined as both together on the very first page of the contract, and described as all content accessed by players through the game launcher. Among others, Crytek arguments included the definition being in a recital rather the main body of the LGA.

Per the GLA, for Star Citizen and Squadron 42 to be separate games, they would also have to be sold and marketed separately and not be accessed through the same launcher, meanwhile, aside from using the same launcher, Squadron 42 is not yet being sold.

Additionally, this term only applies to games made with CryEngine, while Squadron 42 is no longer using it.^[4] In order for the breach of contract claim to be valid, Squadron 42 would need to be sold and delivered before CIG stopped using CryEngine. Pre sales and announcements without delivery of product do not count for damages in breach of contract claims. In order to quantify the damages, the amount of infringing copies sold and delivered need to be quantified, along with the actual damages suffered.

The later copyright claim by its nature could have the right to claim statutory damages in case of proven breach of copyright if CryEngine had been registered before the LGA which was not the case,^[5] which means Crytek would not be entitled to statutory damages and would have to rely on actual damages, which loops back to the argument seen in the breach of contract, of how many copies of Squadron 42 were sold and distributed, and of tying this to actual damages suffered by Crytek.

Breach of contract by using engines other than CryEngine, dimissed by Court

Due to CIG switching from CryEngine to Amazon Lumberyard,^[6]^[7] Crytek’s leading cause of action claimed that CIG had the obligation to use CryEngine and wasn't allowed to move away from it, since CIG was given "exclusive rights to use CryEngine". However there was no merit to the claim as it meant that the license was giving the right to use CryEngine but not the obligation.^[3] What it meant was that CIG was forbidden from using CryEngine in any other format in any other game. This claim was particularly impactful as other claims such as the trademark and copyright notices depended on it. The Court granted CIG’s motion to dismiss the claim as unsupported by the plain language of the GLA and anathema to the concept of a license.

Breach of contract by promoting a competing game engine, dismissed by Court

After the dismissal of the obligation to use CryEngine, Crytek added a new claim in its Second Amended Complaint alleging that CIG violated the GLA by promoting other game engines, namely Star Engine and Lumberyard,^[8] due to a provision lasting the term of the GLA and two years after termination. Crytek argued that CIG promoted other game engines, a claim mostly based on CIG announcements.^[8] If correct, this would lead for example to CIG not being able to display the Amazon Lumberyard trademarks and copyright notices despite using the engine, which in turn would make even less sense if, as per another claim, CIG was also required to still display those of an Engine it doesn't use anymore.

However this provision was in the specific context of "shall not directly or indirectly engage in the business of designing, developing, creating, supporting, maintaining, promoting, selling or licensing (directly or indirectly) any game engine or middleware which compete with CryEngine". But CIG isn't engaging in the business of those things competing with CryEngine. Crytek claims were furthermore based on their own conclusions, not on evidence. Finding that Crytek had stated no facts in support of the claim , the Court granted CIG’s motion to dismiss Crytek’s claim.

Copyright infringement by removal of trademarks and copyright notices

Crytek claimed copyright infringement for removing Crytek’s trademarks and copyright notices for the game engine, however CIG no longer uses CryEngine,^[3] therefore the claim was dismissed by the court.^[4] Crytek itself admitted that CIG didn't use CryEngine by suing CIG for replacing CryEngine with Lumberyard. CIG argued that keeping the old trademarks would misrepresent reality and could mislead, to which Crytek argued that CryEngine was still foundational. Crytek also argued that since CIG had the obligation to use CryEngine the trademarks couldn't be removed. CIG pointed out that it would lead to absurdities and undesirability such as being bound to CryEngine even if Crytek was a sinking ship or having to display CryEngine trademark and copyright notices on someone's else engine.^[9] As other claims, this one is dependant on when CIG stopped using CryEngine,

Conflict of Interest, withdrawn

Crytek claimed that Ortwin Freyermuth was employed by CryTek prior to becoming CIG's attorney and co-founder so he had a conflict of interest when negotiating the contract, however CIG produced a written conflict waiver signed by Crytek dismissing any conflict of interest. CIG called Crytek's statement false, immaterial, impertinent and scandalous. Crytek withdrew the allegation.

Seeking damages, dismissed by Court

Crytek sought damages, however the General License Agreement bars either party from seeking damages from the other. Crytek claimed that it was meant to apply to damages in case of negligent breach of contract and that it wasn't meant to be so broad. CIG argued that the LGA does not differentiate between negligent and intentional damages but between intentional acts or omissions or gross negligent acts, which are associated with tort remedies not contract remedies, that is to say not contractual. CIG argued that the limitation of CIG exposure to damages caused only by intentional acts or omissions or gross negligence was done in part in exchange for the near 2 millions euros buyout license fee paid by CIG. The Court granted CIG’s motion to dismiss Crytek’s claim or punitive damages as unsupported by the simplest black letter law.

The impossibility to sue for damages was initially used by CIG as a reason not to address the claims about the sharing of bug fixes & optimization, as well as about Bugsmashers and Faceware, however CIG addressed those claims later on.

Breach of contract by posting snippets of CryEngine in the video series Bugsmashers, dropped

Crytek claimed that confidential source code was shown on Bugsmashers videos, without initially specifying which videos and which code. As before, not being entitled to statutory damages, Crytek had to prove there had suffered actual damages from the snippets being shown on video. After CIG pointed out that Crytek had already published all of its code and thus could not possibly be damaged by the alleged snippets, Crytek dropped the claim.

Failure to provide bug fixes and optimizations, dropped

Crytek claimed that CIG was required to provide any bug fixes and optimizations they developed for CryEngine up until launch. After CIG showed that it had tendered the code and then actually delivered it, Crytek dropped the claim.

Copyright infringement for sharing source code, dropped

Based on CIG's announcement of a partnership with third-party Faceware, Crytek claimed that CIG violated the GLA’s non-disclosure provisions by sharing CryEngine source code with Faceware. Faceware and CIG submitted declarations from both sides denying that Faceware had ever received access to CryEngine, and Crytek admitted it had zero evidence in support of its claim.^[10] At the time of the announcement, CIG had already been using Lumberyard instead of CryEngine. Even if it had happened, merely granting access to a copyrighted work wouldn't violate Crytek's exclusive rights. It could be a breach of contract, but not a copyright infringement. Crytek dropped the claim.

Breach of contract over loss of benefits, dismissed by Court

Crytek presented it's licensing agreement with CIG as an investment promoting CryEngine and claimed that it would "Not receive the benefit it otherwise would have have derived from defendants use of CryEngine in Star Citizen and attendant promotion of CryEngine". As there was nothing in the GLA obligating CIG to promote CryEngine, the claim which was dismissed by the Court.

Decision

After dismissing every single claim made by Crytek the court allowed Crytek to come back and amend their complaint for a third time if Crytek could provide evidence that would bolster their original claims.^[11]

In october 2019 Crytek released its first set of interrogatories towards CIG, that is a written discovery request to identify and present evidence regarding Squadron 42 standalone release and release date.^[12]

CIG answer was insufficient to go forward, prompting Crytek to fill a motion to dismiss the lawsuit without prejudice nor legal fees in January 2020 with an option to resume the lawsuit following the release of Squadron 42. According to CIG, this concedes that no breach can occur until Squadron 42 is released anyway.

Cloud Imperium Games countered with a motion to dismiss and requested a bond of $US 2,193,298.45 from Crytek to be held in escrow for the payment of legal expense should CIG win, with the court granting a bond of only US$500,000 so as not to jeopardize Crytek ability to continue the legal action in view of concerns of Crytek financial state that had been shared by CIG itself.^[13]

During the dismissal motions, Cloud Imperium Games submitted an email sent from Amazon to Crytek in May 2019, a year and half after Crytek launched the action, answering to Crytek that Amazon had granted CIG a license to the Amazon Lumberyard engine in 2016, which included rights to prior versions of CryEngine in their license agreement, including those versions licensed to CIG by Crytek under the GLA.

In February 2020, Crytek and Cloud Imperium Games filed for a settlement proposal, with a 30-day request to file a joint dismissal of the lawsuit with undisclosed terms.^[14]

In March 24th 2020 the case was dismissed with prejudice, making the claims unable to be brought again, with Crytek and CIG to bear their own respective attorneys’ fees and costs.^[2]

Lawsuit trivia

Crytek names Roberts Space Industries in its lawsuit, despite it not being a party to the General License Agreement, due to Chris Roberts signing the GLA as CEO of CIG, and signing an exhibit regarding the use Autodesk Materials as CEO of CIG and RSI. Crytek claimed that this was a conflict between provisions of the GLA and of the exhibit, in which case the GLA prevails, making RSI a licensee under the GLA. However different signature blocs are not a conflict. What is relevant are the provisions themselves in the GLA and the exhibit, which are not in conflict. Crytek also claimed that RSI has accepted the terms of the GLA by its conduct such as making public announcements and publishing content such as the Bugsmashers videos.^[15] Based on the signature block, the Court agreed that there was a conflict and that the GLA prevails. The court denied the motion to dismiss RSI as a party in the lawsuit.
The General License Agreement names Star Citizen 'Space Citizen' at one point.^[16]
As of January 17th 2020, about two months before the dismissal with prejudice, CIG had incurred over $900,000 in attorney’s fees.^[17]
CIG compared Crytek to "a car smashing a storefront window, stomping the accelerator, doing doughnuts for years, then backing out and maybe circling around to crash CIG again another day. It said that Crytek deserves to have its keys taken away for all time, so that CIG can conduct responsible business without further interference from Crytek or its series of lawyers".^[18]
Some of Crytek complaints regarding the engine were made almost a year after Amazon switched to Lumberyard.
Crytek spent money on legal fees without any gain at a time where they were in financial difficulty.^[19]^[20]^[21]^[22]^[23]^[24]
CIG considers that Crytek sued out of: "wounded pride resulting from CIG move from CryEngine to Lumberyard, rapacity towards the crowdfunding amounts raised by CIG, hope that filing the lawsuit will cause CIG so much distraction and legal expense that CIG would rather pay Crytek in need of capital to make the lawsuit go away, and resentment over many of its employees abandoning Crytek which could not afford to pay them".^[25]

Notes about the lawsuit

Once the obligation to use CryEngine was dismissed as a right, not an obligation, this left Crytek with a short timeline during which breaches of contract and copyright infringements could apply, and even if proven, Crytek would only be entitled to small damages. If Crytek were to go all the way and a judge would rule on the case in favor of CIG, Crytek would be liable under the contract for all costs, all attorney fees, both its own and CIG., which likely wouldn't have been worth it for Crytek.

Article notes

External Links

References

[1] Crytek GmbH v. Cloud Imperium Games Corp., 2:17-cv-08937, (C.D. Cal. Dec 12, 2017) ECF No. 1

[:6-2] 2.0 ^2.1 Crytek GmbH v. Cloud Imperium Games Corp., 2:17-cv-08937, (C.D. Cal. Mar 24, 2020) ECF No. 127

[:5-3] 3.0 ^3.1 ^3.2 It Kind Of Looks Like Crytek Sued Star Citizen Developer By Pretending Its Engine License Says Something It Doesn't, TechDirt, Jan 22nd 2018

[:3-4] 4.0 ^4.1 Crytek GmbH v. Cloud Imperium Games Corp., 2:17-cv-08937, (C.D. Cal. Aug 14, 2018) ECF No. 38

[5] CryEngine 3 Registration of Copyright, TX0008447347 / 2017-12-11, United States copyright office

[6] Star Citizen and Squadron 42 Utilize Amazon Lumberyard Game Engine. Press - Comm-Link. Retrieved 2015-12-23

[7] Star Citizen Switches Engines: Move Along Folks, Nothing to See Here, wccftech, Dec 24, 2016

[:0-8] 8.0 ^8.1 Crytek GmbH v. Cloud Imperium Games Corp., 2:17-cv-08937, (C.D. Cal. Aug 14, 2018) ECF No. 38

[9] Crytek GmbH v. Cloud Imperium Games Corp., 2:17-cv-08937, (C.D. Cal. Jan 26, 2018) ECF No. 26

[10] Crytek GmbH v. Cloud Imperium Games Corp., 2:17-cv-08937, (C.D. Cal. Mar 29, 2019) ECF No. 57

[:1-11] Crytek GmbH v. Cloud Imperium Games Corp., 2:17-cv-08937, (C.D. Cal. Dec 06, 2018) ECF No. 49

[12] Crytek GmbH v. Cloud Imperium Games Corp., 2:17-cv-08937, (C.D. Cal. Jan 03, 2020) ECF No. 92

[13] Crytek GmbH v. Cloud Imperium Games Corp., 2:17-cv-08937, (C.D. Cal. Jul 22, 2019) ECF No. 81

[14] Crytek GmbH v. Cloud Imperium Games Corp., 2:17-cv-08937, (C.D. Cal. Feb 06, 2020) ECF No. 121

[15] Crytek GmbH v. Cloud Imperium Games Corp., 2:17-cv-08937, (C.D. Cal. Jan 19, 2018) ECF No. 25

[:4-16] Crytek GmbH v. Cloud Imperium Games Corp., 2:17-cv-08937, (C.D. Cal. Jan 05, 2018) ECF No. 19

[17] Crytek GmbH v. Cloud Imperium Games Corp., 2:17-cv-08937, (C.D. Cal. Jan 17, 2020) ECF No. 108

[18] Crytek GmbH v. Cloud Imperium Games Corp., 2:17-cv-08937, (C.D. Cal. Jan 17, 2020) ECF No. 104

[19] Crytek breaks silence, closes multiple studios. "Undergoing such transitions is far from easy…" Eurogamer, 20 Dec 2016

[20] Crytek closing five studios, will refocus on ‘premium IPs’ and CryEngine. Only Frankfurt and Kiev studios will remain. Polygon, Dec 20, 2016

[21] Crytek once again in crisis. Staff suffer delayed wages, future of company in doubt. Eurogamer, 13 Dec 2016

[22] Source: Crytek is sinking, wages are unpaid, talent leaving on a daily basis, KitGuru, December 10, 2016

[23] Crysis Developer Allegedly Hasn't Paid Some Employees for 6 Months, Gamespot, December 12, 2016

[24] Crytek employees say they’re not being paid, again. Complaints recall crisis publisher faced in 2014. Polygon, Dec 10, 2016

[25] Crytek GmbH v. Cloud Imperium Games Corp., 2:17-cv-08937, (C.D. Cal. Feb 27, 2018) ECF No. 28

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