This must have really infuriated them if it is true. Pay $500K? for a license and then feel like the company abandoned you to finish up their own game:
GamaSutra
"E3 2006 Issues Documented
A key point of contention is the E3 demo of Too Human, which was not well received - the suit alleges: "The final development kit for the Xbox 360 was released by Microsoft in early September, 2005, meaning that Epic was obligated to deliver a fully operable version of the Engine to Silicon Knights by no later than March, 2006."
"That delivery date is significant, since compliance by Epic would have given Silicon Knights time to prepare an appropriate demonstration version of its Microsoft Xbox 360 game, Too Human, for the very important industry trade show, E3, two months later in May, 2006."
It continues: "Epic apparently was able to achieve a very useable version of the Engine for the Xbox 360 ? the version that it kept to itself, for use only on its Gears of War game (as discussed below), to the detriment of Silicon Knights and Epic?s other licensees, as set forth in more detail below. Epic?s plan to avoid its obligations and hoard all of the necessary functionalities not only harmed Silicon Knights and all of Epic?s other licensees in the industry, but also gave Epic a clearly unfair advantage in the industry."
How so? "That advantage was nowhere more evident than at E3 2006, where Gears of War was awarded ?Best Game in Show? and garnered nothing but laudatory press. By contrast, Silicon Knights ? one of the only other [Unreal Engine 3] developers to publicly display a playable demonstration of its game ? saw Too Human roundly criticized in the videogame press for its technical problems and generally unpolished appearance. The damage to Silicon Knights caused by Epic?s misconduct was manifest, because E3 attendees were able to compare Too Human with another game running ostensibly the same game engine, Gears of War, with vastly superior results."