The legal problems involving the Killer Instinct trademark have been settled recently with Fox and Microsoft agreeing to let each other use the trademark.
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Microsoft has agreed to not produce a television show using their old Killing Instinct license and Fox agrees that there will be no video games for their canceled show.
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While it probably means no Killer Instinct 3 coming any time soon, it does clear the way for the possibility of the original game(s) arriving on XBLA in the future.
http://www.screwattack.com/news/fox-...inct-trademark