## Facts

- Silicon Knights, a video-game developer, licensed Epic’s Unreal Engine 3 (UE3) under a contract permitting specified use for game development.
- Silicon Knights alleged UE3 was defective and untimely and that Epic prioritized its own game development over licensee support; Silicon Knights claimed it therefore built its own “SK Engine.”
- Silicon Knights sued for breach of contract and related theories.
- Epic counterclaimed that Silicon Knights (1) breached the license by exceeding the permitted scope, (2) infringed Epic’s copyrights by copying UE3 source code into the SK Engine and tools, and (3) misappropriated Epic’s trade secrets involving nonpublic source code and technical information.
- After trial, the jury rejected Silicon Knights’ claims and found for Epic on all counterclaims, awarding $2.65 million for breach of contract and $1.8 million for copyright infringement and trade secret misappropriation.
- Post-verdict, the parties litigated remedies, including challenges to the damages structure, requests for injunctive relief, attorney’s fees, costs, and enforcement-related relief.

## Issues

1. Whether awarding Epic both contract damages and copyright/trade-secret damages constituted an impermissible double recovery requiring remittitur or limitation to a single theory.
2. Whether Epic satisfied the requirements for a permanent injunction, including relief requiring cessation of use, destruction of infringing materials, and restrictions affecting distribution of products incorporating the misappropriated code.
3. Whether Epic, as prevailing party, was entitled to attorney’s fees and taxable costs, and on what basis.
4. Whether Silicon Knights was entitled to a stay of execution of the judgment and whether Epic could obtain discovery into Silicon Knights’ assets to enforce the judgment.

## Decision

- The court denied Silicon Knights’ request for remittitur and rejected the double-recovery argument, holding the verdict reflected distinct harms under distinct legal theories.
- The court granted Epic a permanent injunction requiring Silicon Knights to cease use of Epic’s technology and to destroy copies of Epic’s code and related infringing materials; the injunction also imposed restrictions aimed at preventing continued exploitation of the misappropriated technology.
- The court awarded Epic attorney’s fees and costs as the prevailing party, relying in part on findings supporting willful infringement and bad-faith conduct.
- The court denied Silicon Knights’ stay and related efforts to materially alter the judgment.
- The court granted Epic’s motion to compel discovery concerning Silicon Knights’ assets to aid collection and enforcement.

## Legal Principles

- Separate awards for contract damages and for copyright/trade-secret violations are permissible when they compensate different injuries (e.g., unpaid license fees versus value obtained from unauthorized copying or misappropriation), and proper instructions and proof can avoid double recovery.
- Permanent injunctive relief in software IP cases may be warranted where ongoing or future misuse threatens continued loss of control over proprietary technology and monetary relief is inadequate to prevent or police continuing violations.
- Willfulness and bad faith can support both robust equitable relief and an award of attorney’s fees under the Copyright Act, and may also inform fee-shifting analysis tied to wrongful conduct.
- A prevailing party is generally entitled to recover taxable costs absent a sufficient basis to deny or materially reduce them.
- Post-judgment discovery into a judgment debtor’s assets may be authorized to facilitate enforcement and collection.

## Conclusion

The court sustained the jury’s liability and damages findings, held that Epic’s contract and IP awards did not duplicate the same injury, and entered strong post-trial relief—including a permanent injunction requiring cessation and destruction measures—while also awarding Epic attorney’s fees and costs and permitting enforcement discovery.


Silicon Knights, Inc. v. Epic Games, Inc., 917 F. Supp. 2d 503 (E.D.N.C. 2012)