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A few weeks back, the world learned that Crytek was suing Cloud Imperium Games, the development studio behind Star Citizen. Crytek filed a lawsuit in the California District Court and claimed that CIG has not lived up to the terms of their initial agreement to use CryENGINE for Star Citizen. The claim says that the license covers one game and one game alone, and they feel as though Squadron 42 is a separate game and needs a separate license.

Crytek's suit also made the claim that logos, trademark notices, and copyright information were improperly removed from all Star Citizen marketing materials. At the time of the filing, CIG said that the lawsuit was without merit since they switched the game engine they were using. Their new engine is Amazon's Lumberyard. It may be important to note here that Lumberyard is a free game engine that is, wait for it, based off of CryENGINE.

CIG is pushing for a "motion to dismiss" the lawsuit from Crytek. Cloud Imperium Games' main statement in their motion to dismiss can be seen here.
This action never should have been filed. The First Amended Complaint (“FAC”), like the initial complaint filed before it, sacrifices legal sufficiency for loud publicity. Though Crytek GmbH (“Crytek”) twice now conceals the actual Game License Agreement (“GLA”) from the Court and the press, the Court possesses the power to examine the incorporated GLA on this motion. The GLA eliminates virtually every claim and remedy Crytek seeks; Crytek’s admission that Defendants are not even using Crytek’s software gets rid of the rest. The allegations regarding Defendants’ co-founder Ortwin Freyermuth and another employee Carl Jones (the “Offending Allegations”), though modified in retreat by Crytek’s counsel after being confronted with a Rule 11 motion based on a false allegation contained in the initial complaint, still bear absolutely no material relation to any claim or named party, and have everything to do with generating misleading, scandalous press. Neither of Crytek’s two contrived claims can survive the contract, and all its remedies are contractually barred, justifying dismissal as a matter of law. The Court also should send a message to Crytek by striking the immaterial, impertinent and scandalous Offending Allegations in paragraph 15 of the FAC.

In addition, CIG's motion for dismissal makes a few key points. They say that the aforementioned Game License Agreement (GLA) between themselves and Crytek defines "the game" as both Space Citizen and Squadron 42. It also allowed for name changes to occur, hence the move from "Space Citizen" to "Star Citizen" that we more commonly hear now.

The motion also says that CIG are under no obligation to display Crytek branding since they are not using CryENGINE now. CIG also notes that they were never under any obligation to exclusively use CryENGINE for Star Citizen. The motion to dismiss by CIG points out that they were simply given "exclusive rights to use CryENGINE." That is to say, if you take the literal meaning of that phrase, you see that the right is given exclusively to CIG, not that CIG is only allowed to use CryENGINE.

Also, Crytek actually filed their lawsuit against Roberts Space Industry, instead of against Cloud Imperium Games. Sure, RSI is the parent company to CIG, but the initial agreement was made between Crytek and CIG, not against RSI. To be fair to Crytek, I also often get the two entities mixed up. I suppose the difference here is that I'm not the one suing either of them.

There are a couple of claims made in the initial lawsuit that CIG simply provided no response to. This includes concerns surrounding the Faceware technology and the issue about CIG being required to provided CryENGINE bug fixes that they developed.

(Thanks to Liudeius on Reddit for helping to break down some of the finer points of CIG's legal response.)