Crytek files suit

Discussion in 'Star Citizen' started by syberghost, Dec 13, 2017.

Crytek files suit

Discussion in 'Star Citizen' started by syberghost, Dec 13, 2017.

  1. syberghost

    syberghost Guild Admin Staff Member

  2. Fell

    Fell Guild Admin Staff Member

    “Crytek has not been compensated for Defendants’ unlicensed use of Crytek technology in the Squadron 42 game..."

    What game? I'm guessing a lot of this case will hinge on the distinctions between Star Citizen and Squadron 42, which the case seems to highlight only SQ42 as being in breach of Crytek IP rights... The line between the two is pretty fuzzy in my mind I'm sure CIG will be on the side of they're inseparable. I don't see why CIG wouldn't pay the upfront costs and pay royalties after they actually generate SQ42 revenues. (I guess maybe the argument could be, hey people are flying this stuff around in a game engine and CIG sold ships so we should get a royalty on the ship sales?? - good luck splitting that out between SC development and SQ42 "revenues").
  3. Arcfire

    Arcfire Guild Admin Staff Member

    Time for popcorn.
  4. Fell

    Fell Guild Admin Staff Member

    I guess CIG should have never pulled CryTek logos from marketing of SC, SQ42, or any of it. That looks bad no matter how you slice it. They should at a minimum give credit where it's due.
  5. syberghost

    syberghost Guild Admin Staff Member

    Dunno if it's still there, but earlier today the Crytek logo was on the site, but it was a link to Amazon Lumberjack. Crytek's claim on that part is bewildering though.
  6. Fell

    Fell Guild Admin Staff Member

    I seem to remember logging into the PTU only seeing the lumberjack logo, crytek may have been there but lumberjack was either there very prominently, or it was just new enough it caught my eye, or both. I don't remember crytek showing up on the PTU experience at all (doesn't mean it wasn't there...)
  7. HittingSmoke

    HittingSmoke AoA Emeritus

    I read the actual complaint yesterday. There's a lot of nonsense and misinformation going around about this. This boils down to several issues.

    1. Crytek claims that CIG had a license to use Cryengine for a single game, but CIG has been marketing SC and S42 as two separate games.
    2. Crytek claims that per their contract for licensing, CIG would use a certain amount of Crytek branding on SC in exchange for getting below-market pricing on Cryengine. Crytek claims CIG did not follow through with that.
    3. Crytek claims that the contract locked CIG into using Cryengine and their switching to Lumberyard was a breach of the contract.
    4. Crytek claims that CIG violated Crytek's copyright by sharing Cryengine source and/or tools with Faceware developers.
    5. Crytek claims that CIG violated copyright by broadcasting Cryengine source code on BugSmashers.
    6. Crytek claims that Freyermuth (the lawyer who negotiated the contract on behalf of CIG) should have recused himself from the negotiations because he formerly represented Crytek and it presents a conflict of interest. The claim is that Freyermuth had inside knowledge of how Crytek negotiates because of his previous employment.
    7. It is mentioned in the same claim that Carl Jones, who negotiated the contract on behalf of Crytek, left Crytek and now works for CIG but no specific claims is made on that point.
    The tl;dr is this looks kinda bad for CIG.

    1 seems like it shouldn't be an issue since CIG is no longer using Cryengine so there are zero games being developed with Cryengine at CIG.

    2 depends heavily on the wording of the contract in relation to 3. I never paid close enough attention to the branding to see if it was actually removed.

    3 seems like a really strange thing for CIG to agree to. If they did, it's bad. That would mean CIG owes Crytek a lot of money for abandoning Cryengine. I can't imagine that being in a contract without a specific dollar number for a buyout existing so I'd think CIG would only do it as a calculated move.

    4 also depends on the wording of the contract and how much CIG shared. Faceware was operating as a contractor for CIG. Obviously a contractor working on SC for CIG would require access to the source code and development tools and it should be clear in the contract that this is acceptable.

    5 could be quite bad but others have pointed out that the first BugSmashers was created after CIG moved to Lumberyard. There's nothing in the Lumberyard license that disallows exposing the source code. Also it's on Github...

    6 and 7 are pretty clear conflicts of interest and at the least could see both lawyers punished by the bar association. At worst it could invalidate parts of the contract which could affect CIG's ability to defend against other point.

    CIG claims to have made an "outright buyout" of Cryengine in 2013 or so and people are claiming this means they are under no licensing terms. You can buy things under contractual terms. Just ask anyone with an HOA.

    Obviously Freyermuth and Jones aren't going to be able to defend this case since they're both former Crytek employees.

    The reality of this case is it's likely going to be settled out of court and we're never going to know any more details than we know now. This could just be Crytek, well publicised as a failing company, desperately trying to get some money to stay afloat hoping CIG would throw money at them to get them to go away instead of dragging out costly legal bills to defend the case.

    Anyone making matter-of-fact claims about the validity of the case is full of shit and should be disregarded. Only people who have read the actual contract between CIG and Crytek can say for sure.
    Last edited: Dec 14, 2017
  8. Rhyus

    Rhyus Veteran Member

    To my knowledge of what has been said in the past, Squadron 42 and Star Citizen are one in the same. They split up the game into different modules so they could work on it better and have a team only concentrate on their module. Squadron 42 just happens to be the solo player campaign module that will launch players into the Star Citizen aspect of the game. So, they are one and the same, in my opinion.
  9. syberghost

    syberghost Guild Admin Staff Member

    No longer true. It is now possible to buy either one without the other. Those who purchased before the split get both. If you could buy Star Citizen without S42 but couldn't buy S42 without SC, it'd be DLC (but that also might not have been covered by their license, which we haven't seen yet), but that's not the case; they're both standalone products now.

    #3 is also weird to me since Lumberyard is Cryengine; that's the claim I was referring to above as "bewildering" to me, although I can see at least one approach to it that could have some legal merit, if the terms of Amazon's license mean that Crytek gets a lot less money from future projects deciding to go with Lumberyard instead of directly licensing Cryengine. They're counting on Star Citizen to popularize their engine and drive sales for them.
  10. syberghost

    syberghost Guild Admin Staff Member

    Techraptor points out something interesting:

    Squadron 42 was offered up as collateral for a loan CIG took out a few months ago. If it is ruled to be a violation of Cryteck copyrights, that could have implications for the loan agreement. I suspect this isn't as dire as some are painting it to be "Oh no, the bank is going to own Star Citizen and sell the assets!", but it could be big nonetheless.
  11. Fell

    Fell Guild Admin Staff Member

    Wasn't there some shit going down a while back where Crytek couldn't pay it's staff? didn't CIG step in or something? Doesn't seem related to this case but I remember these guys being on much friendlier intimate terms from a "we're all up in your shorts" perspective...
  12. HittingSmoke

    HittingSmoke AoA Emeritus

    Yes and no.

    There were reports that Crytek was not paying staff. Then they got caught up and I believe issued a statement. Then it happened again a few weeks or months later. Shortly after there were rumors about Crytek preparing to file for bankruptsy.

    Then they licensed Cryengine to Amazon for Lumberyard in an eight-figure deal. Reportedly that's all that kept them afloat and out of bankruptsy court.

    The statement from CIG about an "outright buyout" of Cryengine was in response to someone asking about the bankruptcy rumors and how they could affect Star Citizen development. It basically just said they hope everything turns out alright for Crytek but that development would continue with or without them on CIG's branch of Cryengine.

    The problem is, Crytek still hasn't done anything of any value since the Amazon deal and that's no good for lasting revenue. If all the rumors are true, Crytek is in a bad spot for a prolonged legal battle which is another reason it's likely this case will never see the inside of a courtroom unless their case is absolutely rock solid.

    So, ironically, licensing Cryengine to Amazon is what lost them CIG as a client since CIG was very very interested in the networking components of Lumberyard and being Cryengine based meant less work to switch engines.
    Last edited: Jan 7, 2018
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  13. HittingSmoke

    HittingSmoke AoA Emeritus

    I was wrong. CIG did not just settle quietly and have responded to the suit with a motion to dismiss. The interesting bit about Crytek's original complaint is that it did not include a single quote from the GLA. Just vague descriptions of the terms. CIG's response contains the entire contract. People are still poring through it as it's much more thorough than the complaint but these are the bullet points I've gathered so far.

    CIG's response has several quotes from the GLA that specifically outline Star Citizen and S42 separately, including references to them as individual "game".

    "The omitted GLA reveals that the defined term “Game” where CIG can use the Engine includes both “the game currently entitled ‘Space Citizen’ and its related space fighter game ‘Squadron 42.’” (Emphasis added.)"

    So this is instance #1 of CryTek seemingly not having read their own contract.

    Nothing in the contract references a quid pro quo relationship where CIG is getting a good deal on licensing CryEngine in exchange for marketing. It's just a standard statement that for the term of the contract plus two years CIG will maintain CryEngine branding. This is something that would be in any licensing agreement for a game engine. There's an argument to be made that the term (duration) of the contract is written in a way that requires CIG to maintain the CryEngine branding even after moving to Lumberyard, but that's something the courts would have to hash out.

    There might be a little something to this. The contract states that CIG is not to use, contribute to, or promote any game engine that competes with Cryengine for a period of two years after the term of the contract.

    "During the Term of the License, or any renewals thereof, and for a period of 2 years thereafter, Licensee, its principals, and Affiliates 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."

    The "term" goes as far as "the commercial life of the game" in the contract. This could simply come down to whether CIG was still bound by the contract after switching to Lumberyard which they claim they are not. There are also questions as to whether this applies to competing engines developed by other companies or just CIG marketing their own competing engine.

    For fuck's sake there's a waiver signed by Crytek that specifically acknowledges this. Once again, did Crytek not read their own contract?

    CIG did not respond to the claims of showing source code on Bugsmasher or sharing confidential information with Faceware, but both of those apparently happened after the switch to Lumberyard so they shouldn't be relevant.

    CIG's summary response states pretty simply that Crytek intentionally left the contract out of their claim because it would have damaged their case and that this is a publicity stunt by Crytek. This appears to be true with such blatant omissions as the fact that a waiver for conflict of interest was signed by Crytek yet they still included that in their claim for damages.

    I'll post more later after some of the industry lawyers have time to read the entire response and contract in-depth.
    Last edited: Jan 8, 2018
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  14. HittingSmoke

    HittingSmoke AoA Emeritus

    I missed this in the amended complaint from CryTek last week. In the amended complaint they completely removed the text that claims Freyermuth did not resolve his conflict of interest.
    --- Double Post Merged, Jan 6, 2018, Original Post Date: Jan 6, 2018 ---
    CryTek sued the wrong fucking company. CIG signed the contract. CryTek sued RSI. What a waste of time and money.
    --- Double Post Merged, Jan 6, 2018 ---
    Apparently you cannot go after someone for copyright infringement when it's done by breaching a contract so the sharing of the code is not copyright infringement as CryTek says in their claim. It's simply a breach of contract and the crazy damages related to copyright infringements cannot be awarded.
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  15. HittingSmoke

    HittingSmoke AoA Emeritus

    The contract has an incredibly weird disclaimer that states that no damages can be awarded outside of the event of "intentional" actions or "gross negligence". I thought it was weird when I first read it because "intentional" is a tricky word in legalese but not being a lawyer I left it out of my original post. Since then Leonard French has confirmed my suspicions. When CryTek amended the complaint they prefixed every claim with the word "intentionally". Proving that CIG intentionally broke the contract is very different from claiming they just broke the contract. So in theory this is a multi-million dollar contract that states explicitly that no damages can be awarded for breaking it.

    Leonard French states that with the currently-known information this looks very favorable to CIG. Assuming a dismissal in favor of CIG comes to pass they could theoretically go after CryTek for legal costs. We've all heard about CryTek's money problems so that could be very bad for them. Without some sort of bombshell evidence that CryTek left out of their original complaint, they're on super shaky ground.

    That's about it for now until CryTek responds.
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  16. HittingSmoke

    HittingSmoke AoA Emeritus

    I said I was done but this is some light-hearted entertainment on the cautious-optimism cake.

    I don't know if you're familiar with the name I dropped above, Leonard French, but he's a copyright attorney, programmer, and game streamer. His Youtube channel mostly consists of him discussing legal issues in the game community. He's who I wait for before I make any statements I'm not sure about since he's, you know, a real live lawyer. He did a very thorough breakdown of the original complaint by CryTek and then the response by CIG. He does these initially in live streams so he can take comments from the public then edits them down later for his channel.

    So last night when he did his live stream about the complaint, everyone's favorite failure of a game developer showed up in chat to watch Mr. French do an epic takedown of CIG to finally vindicate his impotent rants. So by the end when Mr. French had come to the conclusion that with the available information it looked like CIG was likely to be granted a dismissal, Mr. "Smart" was not so happy and started nitpicking about other places in the contract where "game" was used differently, completely ignoring the part where "The Game" was defined early in the contract as "the game currently entitled ‘Space Citizen’ and its related space fighter game ‘Squadron 42'". "Smart" had to be told multiple times that he didn't understand how contracts work and the "gotcha" he was peddling was in fact a whole lot of nothing.

    Of course after being made aware of his legal inexperience on a live stream in front of SC fans and Goons alike by an actual copyright attorney Derek Smart quietly let the issue go and apologised for wasting everyone's time.

    Oh wait no I'm remembering that wrong. Derek when on a eighty-something-post Twitter rampage that would make presidents of certain countries jealous, referencing a combination of points he'd just heard an actual practicing lawyer shoot down and random tangents about SC fans being bad people.

    Make sure you have some padding on your desk for your head before you go in, but it's a fun look into the mind of a narcissist.

    Some highlights include: Him laughing about CIG making the deal with CryTek before they had enough funding to cover the licensing, completely missing the part where the licensing payments were spread out over years or that a company's value has nothing to do with how much money they have in the bank. Also the contract wasn't finally signed by Chris Roberts until 2013 when they had just passed 20 million in funding. Him focusing very heavily on the copyright infringement issue as a "CIG is over" card when the damages awarded for that would be a small fraction of a single ship sale for CIG even if it held water. Going on and on and on about the definition of the word "exclusive" because he doesn't understand that a dictionary definition and a legal context aren't the same thing. Saying that the date of the GLA proves that SC was not in development when Chris Roberts claimed it was because CIG couldn't possibly have been developing a game with CryEngine before signing the contract. Despite the fact that CryEngine source is up on Github and they could have easily been making proof of concepts to vet various engines before agreeing to licensing terms with CryTek.
    Last edited: Jan 7, 2018
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  17. HittingSmoke

    HittingSmoke AoA Emeritus

    Last post on this for now, I swear. I'm trying to keep different topics in separate comments for readability.

    WHY would CryTek do this? Why would they file a claim that, at worst, could be interpreted as maliciously inaccurate? Several claims are undeniably frivolous. Here's what I can come up with in descending order of how likely I think they are:

    1. CryTek could be failing and was making a hail-mary play hoping CIG would settle instead of spending money on legal costs. One would think that's a gamble they wouldn't take since that opens them up to legal costs if they fight and CryTek loses. It's an extra-confusing scenario when you realize that CIG obviously had a copy of the contract and was employing both lawyers who negotiated it. Literally the best two people on the planet to interpret this contract work at CIG right now. CryTek hardly had the upper hand here. This is all beside the damage CryTek would do to their brand by being involved in a very public frivolous lawsuit against a business partner. Who the hell is going to want to do business with CryTek after that?
    2. Someone at CryTek is so angry that it's driving very poor decision-making. This contract was originally written in 2012 when Star Citizen was nothing more than the biggest Kickstarter of all time just passing the 6 million dollar goal before the initial campaign ended. In the contract CIG bought out royalties to CryTek for 1.25 million dollars. What that means is that CIG owes CryTek exactly zero dollars going forward no matter how successful the game is. That 6 million dollar goal turned into 10 million, then 50 million, then 100 million, and now CryTek has to watch the funding break 176 million dollars they could have been collecting royalties on some of had they negotiated a tiered or percentage-based payment model as is fairly standard. If I were the CEO of a company getting bad press over rumors of bankruptcy and not paying my employees, I'd be pretty fucking salty about that myself. Then when my lawyers and developers started jumping ship to the new company I'd feel cheated as hell. Then when my company-saving deal with Amazon ended up stripping my branding from the most well-funded video game in history I might just get angry enough to do something stupid. CryTek is currently in the middle of an episode of Curb your Enthusiasm. Now I'd like to think this scenario wouldn't happen because there would be checks and balances within the company to prevent one person from doing this, but I have no idea. I'm leaning towards this one just because of the sloppiness of all of this. You don't sue the wrong company when you're thinking clearly.
    3. CryTek has some bombshell evidence they are, for some reason, sitting on until after CIG's motion to dismiss. This is last on the list simply because I can't think of a single reason they would approach the suit in this way. I'm not sure what hand they could have been trying to get CIG to show by withholding the documents they're sourcing their claims from and suing the wrong damn company.
    I originally erred slightly on the side of CryTek because I gave them the benefit of the doubt that they wouldn't file a breach of contract suit with claims that are so drastically far from the actual content of the contract that a layman could pick it apart. I'm just confused by this whole situation. It's very bizarre.
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  18. syberghost

    syberghost Guild Admin Staff Member

    Me too, based on that and the fact CryTek hired lawyers that have a history of knowing better than this. I chalked anything I couldn't see down as "yeah, but these lawyers have seen everything and still took the case".
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  19. Arcfire

    Arcfire Guild Admin Staff Member

    I like explanation #2 the best. It gave me a giggle.
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  20. HittingSmoke

    HittingSmoke AoA Emeritus

    To put the percentage thing into perspective, when the contract was written in 2012 that 1.25 million dollar buyout was around 21% of the funds raised. That sounds like a hell of a short-term deal for CryTek, assuming the funding would level off and the game would just start getting made. When GIC announced they were moving to Lumberyard they were at around the 130 million mark according to the dates I'm finding. Unreal Engine 4 has a standard 5% royalty rate. At 5% that would be in the 6.5 million dollar ballpark if they'd negotiated percentage-based royalties. I've heard of game engine licensing agreements that are as high as 10% in royalties so that 6.5 million could easily be the low end of the potential royalties CryTek would have been owed. It would depend specifically when CIG decided to discontinue their use of CryEngine but looking at the crowdfunding timeline we can safely say CryTek would have at the very least doubled their money from CIG had they had more forethought with royalties instead of being greedy in the short-term. It reminds me of Walt and Grey Matter on Breaking Bad. Shooting yourself in the foot by cashing out of the soon-to-be insanely successful company.

    Anyway, both Leonard French videos are up so if you want to stop reading my rambling interpretations and listen to a real lawyer, here you go:

    CryTek files suit:

    CIG files motion to dismiss:
    --- Double Post Merged, Jan 8, 2018, Original Post Date: Jan 8, 2018 ---
    I just realized I've been saying dollars but the contract is in Euros. Replace as needed.

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