Texas developer faces $7.35 million in damages and loss of Section 8 license following failed appeal.

Sugar Land, Texas-based TimeGate Studios faces $7.35 million in damages and the loss of the Section 8 license following a failed appeal in a fraud lawsuit from SouthPeak Interactive, according to an April 9 U.S Court of Appeals decision spotted by Polygon.

A source with knowledge of the matter told Polygon today that TimeGate staff met this week to discuss the company's future, including its recently announced free-to-play stylized shooter Minimum.

It is unclear how the company plans to move forward or what changes will be made following the decision.

The legal battle between TimeGate and SouthPeak originated in 2009, when TimeGate sued the publisher, alleging multiple breaches of contract. In response to this, SouthPeak claimed that it was TimeGate that breached the contract by "failing to put forth its best efforts in developing" Section 8.

Both parties then entered into arbitration with a third party, who found in favor of SouthPeak, awarding the company $7.35 in damages and total control of the Section 8 game license. This decision would be overturned in federal court last March.

The U.S. Court of Appeals' decision this month to reverse and remand the previous federal ruling would force TimeGate to pay $7.35 in damages and give up control of the Section 8 IP.

TimeGate was also co-developer on Aliens: Colonial Marines. The studio confirmed job cuts last month, with sources claiming the layoffs were due to a publishing deal going belly up.

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