Click the link, read the article.
Essentially SK is saying that Epic purposefully breached it contract with SK, among other licensees, while developing their own titles. Thus costing SK oodles of money and eventually forcing them to develop their own engine.
It goes on to detail a number of specific alleged breaches of contract, particularly related to the delivery of Xbox 360 versions of the Unreal Engine 3 code. Epic's licensing document stated that a functional version of the engine would be available within 6 months of development kits being available.
Silicon Knights claims: "The final development kit for the Xbox 360 was released in early September, 2005, such that Epic was obligated to release the functional Engine for that platform no later than March, 2006."
The suit continues: "However, that deadline came and went without Epic providing Silicon Knights with a functional version of the Engine. Indeed, it was not until much later (November, 2006, far too late for time and cost-sensitive projects like SK’s videogames) that Epic ever provided anything resembling working Xbox 360 code to its licensees. Even at that belated date, though, Epic did not provide any guidance to licensees in how to implement the code it finally released."
I am certain Epic has some interesting retorts with regards to these claims, and all will be revealed when they release their legal responses in court.
One has to wonder though, should Epic be a middleware supplier or a publisher/developer. It sounds like it is hard to be both, let alone one or the other.