http://biz.gamedaily.com/industry/feature/?id=16868 For those who don't know, Silicon Knights is the one that made Eternal Darkness and MGS: The Twin Snakes and the upcoming Too Human. Epic made the Unreal Tournament and Gears of War line. Sooooo....Yeah
You're making it out to see as if Silicon Knights is suing them over the engine itself. Actually they are suing them because of the poor tech support Epic is giving them, as well as other companies. The engine itself is highly unoptimized.
Yeah, they also missed deadlines for delivery of code for the console versions as well. Come to think of it, how many games using the engine have been shipped or delayed? Maybe it is like SK says, but other developers keep it down or something.
UE is just not ment for consoles. It still shocks me that companies were buying UE3 licenses in droves. Sure UE3 is more optimised for consoles (360) then UE 2/2.5, it's still far from ideal. Only reason it's been easier on 360/xbox is because of it's PC like SDK.