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Derek Smart @dsmart
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BREAKING! Crytek have now filed a second amended complaint that solidifies their claims.

They specifically went for what I wrote that they would as per 2.4.

It's funny - and I'm not even a lawyer.

I will have more in a bit.…
ICYMI. My previous coverage was converted into an article, and also now includes info about their latest financial filing in the UK.…
SAC for breach of contract and copyright infringement:…
The SAC filing is so destructive, and is LOT worse than the FAC - if you could possibly imagine that.

Precisely as I had written days ago, Crytek not only amended to focus on Section 2.4, they also communicated their intention to file for injunctive relief.
For an international super law firm like Skadden, one has to wonder if they set a trap when they originally focused on 2.1.2 (which the judge dismissed in part), while ignoring 2.4 (which the judge pointed to).
I went back to review the FAC; and while 2.4 wasn't the focus there, they alluded to it in other parts of that filing, while focusing on 2.1.2.

Which, as I explained earlier this week, is probably why the judge notes were like "Look, this is your real claim...right over here"
Focus of the SAC moved from the "exclusivity" (2.1.2) to the actual "material breach" (2.4) itself.

This is as interesting as it is exceptionally destructive because 2.4 IMPLIES a form of exclusivity whether or not CIG/RSI used CryEngine.
For context, take a look at both of those in the GLA (which CIG, not Crytek) filed in the lawsuit.…
For those of us who have read, agreed to, signed, and litigated software contracts for DECADES, let me explain this problem for context. This way, anyone who thinks my comments are just hyperbole, will rethink that opinion.
1st, I have no reason to believe that this was a trap set by Skadden.

I think they either assumed that 2.4 would be litigated anyway on the MtD dismissal, or they were waiting to hit and prove it during discovery. The judge basically forced them to focus on it sooner than later
If 2.1.2 had survived the MtD, which most of us assumed that it would because of our understanding (which the judge corrected in her ruling) of "exclusive", 2.4 wouldn't have mattered anyway. Why?

It was ALREADY part of the FAC as per Section C(38)…
That Section C(38) is what contributed to the ambiguity between 2.1.2 and 2.4 because if 2.1.2 goes out the window, so too does that. Thus leaving 2.4 to stand on its own. But Skadden never focused on 2.4, relying on 2.1.2 and Section C(38) to be a blanket attribution.
The entire Section C of the FAC is a blanket accusation that they breached the GLA by using another engine other than CryEngine - not just a COMPETING (see 2.4) engine.

You see why there was no need to even focus on 2.4?
As a result of this "strategy" (barring any evidence that Skadden planned this trap), this is why Section C(39) of the FAC makes mention of 2.1.2 without ANY mention of 2.4 which was the STRONGER & PROVABLE allegation.

The judge flagged it because she too noticed this oversight.
In the CIG/RSI response, as they are required to address "stated" allegations, that's why their MtD was focused on 2.1.2 and neither side made mention of 2.4. Not that CIG/RSI would have, as that would be like showing the cops where you buried the body.
The moment I read the judge's ruling, I immediately saw what she was going for, and I predicted that Crytek was going to dive right into 2.4 where they have more damaging claims which are simply IRREFUTABLE.

I also pointed out why this "exclusivity" issue STILL stands, regardless of 2.1.2

So basically, precisely as I had stated, this was the basis of the FAC that Crytek filed last night.

It's also why they didn't address 2.1.2 at all because they realize that they no longer needed to.

Which brings me to...
This is a comparison of the FAC (left) and the SAC (right)

Notice the wording now?
As you can see, they have basically abandoned the claims in 2.1.2 in their ENTIRETY, while focusing on the MATERIAL & MORE DAMAGING BREACH in 2.4

It's absolutely mind-blowing that the judge gave them this so early on, rather than waiting for it to come up in discovery & later.
Skadden either set a trap here, or were of the opinion that 2.1.2 was just as damaging as 2.4; but the former would carry more weight than the latter (which would have been dragged into 2.1.2 during trial anyway).
That they hinged on a rather tenuous 2.1.2, rather than the slam dunk that was 2.4, is what's puzzling; and which leads me to believe this had to be some sort of long haul strategy.

Let me explain where I am going with this...
Let's assume for a minute, that 2.1.2 wasn't ambiguous, and that we didn't need a seasoned Federal judge to tell us that we were all ignorant, and then rubbed it in by citing case law proving it.
Let's also ignore the fact that not even the CIG/RSI lawyers made the case for 2.1.2.

They went in a completely different - and hilarious - direction because they claimed that 2.1.2 meant that only CIG/RSI could use CryEngine - and nobody else.
Basically the judge said to both sides (and to all of us in the "exclusive" debate):

"You're all ignorant. Quit wasting my time on this bs; and go look at 2.4 which is what you SHOULD be arguing over"

This was the impetus for her granting (in part) 2.1.2 while POINTING to 2.4
Now that 2.4 is in focus, and we already KNOW that CIG/RSI has NO defense against it, if this was the trial, it would have ended TODAY.

Here's why.
2.1.2 allowed CIG/RSI to use CryEngine. They weren't forced to do because there was no implied (by the GLA) grant of exclusivity even IF that was the understanding by both parties at signing.

Given the declarations in the FAC, I have reason to believe exclusivity WAS the intent.
Even if during discovery (depositions, emails etc) it came out that there was evidence that exclusivity WAS the intent, CryTek could still raise that in a responsive filing and 2.1.2 would be back in play because INTENT can and will overrule contractual language that is ambiguous
Now it won't matter. Any claims in 2.1.2, with or without evidence of intent to an exclusive use, would pale in comparison to the complete and utter destructive force that is the infringement in CryEngine being used in SQ42, and the material breach in 2.4. BOTH are now in play.
The reason that 2.4 is just as destructive as the SQ42 infringement (which the judge allowed to stand) is that there is more than enough evidence that CIG switched to a COMPETING engine: Amazon's Lumberyard.

Wait! It gets worse.
The language in 2.4 not only prevents CIG from using a competing engine, it also prevents them from being in the "business of" doing so.

I bring this up for a reason. First, read this.…
The 1st part of 2.4 is explicit: "in the business of designing,"

Notice the 1st comma separator. It goes downhill from there - fast.
Some of our Internet "lawyers" were claiming that 2.4 pertained to CIG developing their own engine based on CryEngine, and trying to do all those things.

I said it was FALSE back in Jan.

The judge agreed in her MtD ruling. And went further. She POINTED IT OUT to Crytek.
Before I even get into that, here's the worst of 2.4.

The "term" of the GLA is, for all intent and purposes, FOREVER + 2 days.

The GLA says so. Let me explain why.
1) The GLA CANNOT be terminated without notice to Crytek

2) The "commercial life of the game" is basically for as long ANYTHING pertaining to the Star Citizen / Squadron 42 collective IP are being sold

3) It's not terminated just because CIG stopped using CryEngine
4) Even if they gave Crytek notice today, it's still NOT terminated for a period of TWO YEARS thereafter.

5) Whether they are 100% using Lumberyard or not, is IRRELEVANT. The GLA is 100% in FULL force and effect for as long as SC/SQ42 are in commercial sales
What does all this mean?

Well, that's the utterly destructive nature of the 2.4 slam dunk.

"the term of the license"

Wait! It's gets worse (if you can imagine that!)
CryTek doesn't even have to prove that CIG breached 2.4 by licensing AND using a competing engine (Lumberyard). CIG already PROVED this for them.


All CryTek has to prove is that the GLA was never terminated.

Since neither side is disputing this, we're off to the races.
And if they were to terminate the license today, Section 8.3 is so destructive to the projects, that you can easily see WHY the GLA isn't terminated, and WHY they never moved to terminate it.
How does Amazon and/or Lumberyard factor into all of this?

Let's discuss that.

But for context, you should first read my Dec 2016 blog about this now infamous "switch"…

CryTek licensed their engine to Amazon a few years back.

Amazon used that engine to develop a custom engine called Lumberyard.…
As these things go, the license between CryTek and Amazon is different from the one (GLA) between CryTek and CIG/RSI.

For one thing, Amazon was allowed to not only modify, and distribute, but also sell their derivative version.

CIG/RSI had no such rights.
CIG came up with their own derivative custom engine called StarEngine.

Since even before they finally signed the GLA, they were already building this using CryEngine.
It's already a PROVEN fact that during the 2012 campaign, and right up to 2014, the Star Engine as we know it, simply did NOT exist.

Crytek built the 2012 pitch demos using base CryEngine.
In fact, Chris had been evaluating CryEngine as far back as 2010 (!), back when he was a consultant for a now defunct Canadian company called Blink Media.

I covered that in this thread.…
Contrary to what CIG has been leading backers to believe, not only have they NOT fully switched from CryEngine to Lumberyard, but they STILL have portions of it in their code base.

Here is Chris's statement from back in 2016 after I blew the whistle.…
Let's argue that up to 2016 they DID in fact switch.

They would STILL be in 100% breach of the GLA. Why? Because :

1) the GLA has NOT terminated as per Section 8.x

2) they've ADMITTED to BREACHING Section 2.4 - in its ENTIRETY.

In public. And it's irrefutable.

So you see WHY whether or not they switched is completely irrelevant as far as the GLA is concerned?

And THAT is why the judge, besides her 2.1.2 ruling, drew attention to 2.4.
CIG could have used Unity or Unreal Engine, and it wouldn't have mattered. They would still have been in breach of the GLA because not only was it not terminated, but also in concert with 2.4, they were already locked into a "passive" exclusive use contract.
While integrating Lumberyard into Star Engine is a LOT easier than going to a different engine architecture like Unity or Unreal Engine, the GLA is clear that they simply COULD NOT DO THAT without first terminating the GLA, which involves REMOVING CryEngine from Star Engine.
And had they done that in Dec 2016, while notifying CryTek, the GLA would have terminated, but they would have STILL been in breach of within 2 years (end of 2018) they hadn't removed all CryEngine code from Star Engine, while PROVING this to Crytek as per Section 8 of the GLA
Now all of this is why 2.4 (not 2.1.2) is now the focus of the SAC, and the reason that Section C now looks like this:
What is interesting to me is that in Section C(37) they are now also going after the derivative Star Engine.

This is a brilliant strategy because they KNOW that this is their own custom engine which could use either base CryEngine or Lumberyard.
This is patently relevant because Star Engine not only violates the ENTIRE Section 2.4, but they also created their own engine based of CryEngine, then used it to compete against CryTek's own engine.

Let me explain just how f-cking serious this is.
CIG has positioned and promoted Star Engine as their own engine which is superior to the base CryEngine.

Even though they could modify the engine as per the GLA, Section 2.4 explicitly prohibited them from "directly or indirectly" doing anything "which compete with CryEngine"
This public list, while not exhaustive, contains all the improvements in Star Engine, which put it in competition with CryEngine. That's what CIG has been promoting.
It's not relevant that they did it - because they were allowed to. What's relevant is that they were not only actively promoting it (there are videos, interviews etc - just Google "Star Engine"), but they were also claiming it to be superior to CryEngine. The GLA forbids it.
Heck, this is an entire panel about Star Engine from the Dec 2017 CitizenCon.

They're basically creating Crytek's evidence for them.

That the GLA hasn't terminated, even if they weren't using CryEngine, they were STILL required to promote it AND also display the CryTek and CryEngine logos - as per the GLA requirements.

But no, instead they were promoting their own engine, built from the licensed CryEngine.
Remember, Amazon CAN promote, sell (or give away), sub-license Lumberyard obviously because of their license. But we've seen the GLA and we KNOW what CIG can and cannot do.

And they've been breaching it publicly.
It's even worse when you consider that, 2.4 breach aside, now that they are completely on the infringement hook with SQ42, they were promoting that game since 2014 - with CryEngine. Here is an eye-opening video montage.

I also want to point out that Crytek, by virtue of Section 7.3, is entitled to ALL of those Star Engine improvements.

And THAT tech belongs in CryEngine - which is now FREE to the public.

Start laughing because what comes next, is gloriously hilarious...
With the GLA is in full force and effect, notwithstanding the 2.4 breach, this is what 7.3 does.

- CIG licensed & paid for CryEngine

- spent years + MILLIONS of backer Dollars to build Star Engine

- CryTek is ENTITLED to ALL of those improvements and...

- CAN release it FREE
If any of this sounds familiar, it's because I said the same thing back in Jan.

And now CryTek has revised and solidified their language, while now making Star Engine the central focus of one of their most damaging claims.…
I am not going to delve into the new wording in the SAC regarding SQ42 because I already covered it in my last article.

Aside from being the most damaging breach of the GLA, and which will carry the most significant monetary damages, it's also going to be primary focus of...

In their SAC, Crytek removed the "punitive damages" section, not only because the judge granted it in the MtD, but because, well, they have bigger fish to fry now, and in which those damages will collectively eclipse it.
Basically, anyone who thinks that breaches like that seen in 2.4, 7.3 and the SQ42 infringement are just "a few million Dollars", doesn't know how this works.

And they are completely ignoring the caliber of attorneys at Skadden.

This, my friends, is what an E.L.E looks like.
As if the SAC wasn't destructive enough, Skadden also took advantage of the judge's "relief" (allowance + permission) and her pointing out 2.4, to ask for discovery to begin immediately.…
That ANY breach of the GLA grants CryTek access to the entire Star Engine source code, and indeed ANY code used for Star Citizen or Squadron 42, now puts CIG in the absolute worse possible position now more than ever before.
Here is how just AWFUL this is for CIG. Below is what Crytek can now gain access to WITHOUT question because, GLA breach aside, Section 7.3 GRANTS it!

1) Star Engine source code and runtime (Star Citizen / Squadron 42)

2) Source control version logs. They use Perforce
With access to the source code, unless Crytek is able to build (compile + link) Star Engine, to produce the Star Citizen or Squadron 42 runtime, CIG would be non-compliance of discovery. And that takes us into sanctions, contempt of court etc.
The source control (whichever one they use, if not Perforce) will show not only who submitted a build change, but also in most cases, what those changes were.

In fact, even with a commit that has no log comment, you can download repo images and compare on your end easily.
I do this all the time in development. e.g. as I was working on this massive upcoming update to one of my games, I was looking for breaking change that I had committed (I use svn). Only to notice that I didn't do a log comment when I committed it.…
This is what my svn (I use TortoiseSVN btw) source code commit log looks like. It's the same as Git, Perforce etc, except for the UI and some options.
I seldom use highly descriptive commit comments when I do commit code changes to my remote server repository. So if I need to check something, if I forget, I have to download before/after images, then compare them. Or I can compare right on the remote repo if needed.
In that image example, I had a nasty bug which I later found out was because I had made a critical change in source, then "optimized out" most of it because I ported it from legacy MASM code to C++.

So I fixed that, then committed the missing files in revision 371
And part of how I found this out, wasn't through debugging, it was through comparing before/after source changes. And I immediately spotted - and fixed it.

So that is some of what Crytek now has to engage in during their review of the source code.
Not only will the source control logs give them a massive head start into understanding how the code has evolved since DAY ONE, they can also fill in the blanks by downloading image changes - and comparing them.

Wait! It gets BETTER!!
Crytek will also know with 100% certainty not only what stage of dev Star Citizen is in, but also in what form and stage Squadron 42 is in, or if it exists AT ALL.

Wait! There's more!!
Crytek are the architects of the base CryEngine used by BOTH Lumberyard AND Star Engine. So guess what? They are in a better position to understand the code and ANY revisions to it.

Not only that, they will be able to know, with 100% CERTAINTY if/when Star Engine switched.
This is as BAD as it gets for CIG because now, a third-party litigant will not only have access to their proprietary code (which they were entitled to), but they have every RIGHT to actually OWN it.

And that aforementioned litigant will now also have access to their secrets.
And by secrets, I don't mean code only, because CIG has no standing, seeing as they AGREED to give it to Crytek as per Section 7.3. I am talking about all the LIES that CIG has been telling regarding the development. The ONLY way to know, is via source code. Crytek now has access
I was saying to someone in my Discord chan earlier, criminals make the dumbest mistakes - and that's how they get caught.

In this case, all CIG had to do was

- pay for a SQ42 license : less than $2M
- promote CryEngine : free
- share CryEngine code changes : free

That's it.
CIG got a windfall in crowd-funding. Then not only did they screw their partner who made the demo that propelled this whole thing forward, but they also got GREEDY and decided to engage in copyright infringement, even as they proceed to gut their partner of their talent!
In July 2015, I wrote Interstellar Discourse in which I highlighted this very same thing, and how it was going to come back to bite them.

Three years later - here we are.…
Sources tell me that prior to the Dec 2017 lawsuit filing, Crytek was trying to get them to cure their breach, reach a settlement to compensate them etc. Instead, Ortwin was confident that they would get away with it, and so he kept blowing them off.
Then Crytek files a lawsuit, and CIG is all like "We don't even know why we're being sued"

These are despicable, greedy, bastards, who have benefited from backer money, and have now all but sealed the fate of the project and company by their very actions.
What's going to happen now is, settlement or not, Chris has a target he can pin the destruction of Star Citizen + Squadron 42 on. He's going to blame it on the lawsuit, while ignoring that 7 yrs + $190M later, he couldn't deliver even 20% of what he promised.
I don't even have to mention that now, @CouttsandCo bank loan is going to immediately default if F42 can't pay off that loan. F42 gave as collateral a title that is now encumbered by a lawsuit, and which the judge granting injunctive relief in this case, is now DEAD
The worst of that is they went and breached the GLA by splitting the project into two, because they needed SQ42 as a separate project in order to offer it up as collateral over in the UK in order to get a loan to finance a project they already raised over $180M for at the time.
That's basically where we are with the SAC.

What's left to be seen is if Crytek pushes for the injunction now, or after discovery. Either way, it's coming, and for CIG, there is NO escaping it because the judge herself has opened that door sooner rather than later.
I have every reason to believe that CIG is going to be spending a LOT of backer money filing motions to suppress and/or file under seal most of what's coming in discovery. Particularly the money part that CIG has been so desperate to hide from backers.
And bad blood aside, seeing as the Crytek roots stem from being devs and an integral part of gaming proper for so many years, my guess is that they WILL fight to put as much of this into the public domain as the judge will allow.
It's worse for CIG because even in her MtD ruling, the judge herself addressed the "crowd-funding" aspect of the project. So she is already aware of where this money came from, and what is at stake in terms of what can|cannot go into the public domain.
Bookmark this tweet: I expect that if Crytek has to object to any motion to suppress and|or file under seal anything related to this project, that CIG is going to invoke the ToS. Good thing I've been tracking ALL versions.…
So now we wait to see if CIG files a response to the SAC, and whether not the judge agrees for discovery to start right away.

Either way, win, lose, or draw, the project is DEAD. Anyone putting money in it, is just tossing it into an open flame.

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