Silicon Knights was founded in 1992 by Denis Dyack in his home town of St. Catharines, Ontario, Canada. The studio began as a developer of PC games, but transitioned to console development in in 1996 to make games for the Sony Playstation, beginning with Blood Omen: Legacy of Kain.
In 1998, the Canadian developer was signed by Nintendo to be an exclusive second party developer. Under that deal, Silicon Knights developed only two games: Eternal Darkness: Sanity's Requiem and Metal Gear Solid: The Twin Snakes, the latter of which was overseen by both Konami and Nintendo. Both titles were published on the Nintendo Gamecube.
Their exclusive relationship with Nintendo ended in 2004, and in 2005 Sega announced a partnership with the studio. However, nothing of this partnership ever took form.
Too Human began development as a title for the original PlayStation, but progress was shelved while Silicon Knights worked on Eternal Darkness and Metal Gear Solid. After the split from Nintendo, the studio revisited the Too Human concept and restarted the game's development as an Xbox 360 title. It was published by Microsoft in 2007 and was intended to be the first part of a trilogy.
However, a cool critical reception and poor sales of Too Human delayed those plans. At around the same time, Silicon Knights became embroiled in a legal argument with Epic over the use and support of the Unreal Engine 3. Silicon Knights claimed that Epic provided insufficient support for the engine, hampering their development on Too Human while Epic used the licensing profits to develop Gears of War. Epic retaliated with a countersuit. Silicon Knights abandoned use of UE3 in favor of developing their own engine for Too Human and future projects.
In 2011, Silicon Knights partnered with Activision Blizzard and released X-Men: Destiny to average to poor reviews. It was later alleged that the studio had used development funds granted to them by Activision intended for X-Men: Destiny to instead work in secret on a tech demo for a potential Eternal Darkness sequel. Further compounding Silicon Knights's troubles, the company lost their suit against Epic in large part due to the fact that the game engine code in Too Human and X-Men: Destiny, supposedly created using a new internal engine, in fact featured large chunks of code taken from the Unreal Engine. As part of Epic's legal victory, the court ordered all unsold copies of both Too Human and X-Men: Destiny destroyed.
Since the release of X-Men Destiny, the vast majority of the staff at Silicon Knights, including Denis Dyack, have left the company. What remains of the studio has been locked in legal appeals to Epic's triumph in court.