Local game-maker Epic Games, creator of the best-selling “Gears of War” and “Unreal Tournament” franchises, has been served with a lawsuit by Canadian game developer Silicon Knights, creator of “Eternal Darkness” for Nintendo and the upcoming "Too Human" game for Microsoft.

The suit, which was filed in a federal court in Greenville, is aimed at Epic’s Unreal Engine 3, which Silicon Knights is licensing from Epic to create the Xbox 360 "Too Human" game.

Silicon Knights is suing Epic for fraud, breach of contract and other claims. The developer said Unreal Engine 3 did not work as Epic represented it would and that Epic has been unable or unwilling to fix it.

When contacted in Europe, where he’s traveling on business, Epic Games Vice President Mark Rein said he couldn’t comment on the suit. He did issue an e-mail statement.

"We believe the claims against us are unfounded and without merit and we intend to fully defend against them," the statement said. "We’d love to tell you more about it, but unfortunately our lawyers want us to save our comments for the courthouse, so we’re going to do our best to comply with their wishes."

Silicon Knights President Denis Dyack has said that the developer has been working with Epic for over a year to try to fix this problem and claimed that Epic never intended to deliver the Unreal Engine 3 as a fully functional game engine as promised. Dyack has accused Epic of licensing the engine so it could collect fees from developers to fund its "Gears of War" game. He said the licensing money should have instead gone to completing the Unreal Engine 3 technology.

Silicon Knights has delayed its "Too Human" game and started over with its own game engine, since it could not make Unreal Engine 3 work.

According to the 50-page lawsuit that Silicon Knights has distributed to game outlets, Silicon Knights wants to recoup the lost time and money spent on trying to make Epic’s game engine work. The suit asks Epic "to disgorge all profits obtained on its ‘Gears of War’ game as a result of the misconduct. …" The developer is leaving up to the courts to decide what these damages should be monetary.

The Unreal Engine 3 is the most popular game engine in the industry today. A majority of the top games at E3, including "Bioshock," "The Agency," "John Woo’s Stranglehold," "Blacksite: Area 51," "Brother’s In Arms: Hell’s Highway" and "Unreal Tournament 3." No other developers have complained or sued Epic over the Unreal Engine 3 technology.