TimeGate Studios lost the latest round in court of its battle against publisher SouthPeak Interactive, which could result in the studio paying $7.35 million in damages and losing the Section 8 intellectual property. Polygon obtained the court documents that SouthPeak recently won its appeal of arbitration handled early last year.

The two companies have been fighting in court since 2009, when TimeGate sued SouthPeak for embezzling royalties and SouthPeak took on Timegate for fraudulent misrepresentation in its publishing agreement.

TimeGate most recently co-developed Aliens: Colonial Marines and laid off 25 employees. It is currently working on the free-to-play shooter Minimum. Meanwhile, Southpeak is busy... um, looks like it's busy making money through litigation. The publisher hasn't produced a game since Stronghold 3 in 2011 according to its own website.

This article was originally published on Joystiq.

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