Last August, rumors spread that Silicon Knights was ditching Unreal Engine 3 for its long-awaited Xbox 360 game Too Human, because the frequently licensed game engine supposedly ran poorly on Microsoft's console. Those rumors didn't last too long before Silicon Knights president Denis Dyack squashed them in a statement, saying rumors of the group "completely scrapping" the engine were false.

Despite Dyack's statement, those rumors appear to have been partially true, as revealed by Silicon Knights this week in a 54-page lawsuit it filed against Epic Games over Unreal Engine 3. In its complaint, the Ontario-based developer claims that it licensed the engine based on "false and misleading statements" from Epic. Silicon Knights said the Gears of War creator's contractual breaches forced it to begin making its own game engine last May, just before an underwhelming public debut of the Unreal-powered Too Human at the Electronic Entertainment Expo.

I think Silicon Knights is stretching quite a bit on this one.