They didn't copy or reverse-engineer stuff. They didn't abuse any existing copyrighted works but instead invested a lot in creating their own non-commercial sequel of the game.
They made a completely new game, with their own storyline and engine. The only reference to the King's Quest is that made it a sequel to the original series. Oh, they even dropped the name King's Quest almost a decade ago. In essence, the new game is an original copyrighted work by them.
There's something horribly wrong with that.
You shouldn't be able to "own" characters or a plot or a storyline: you should be able to own actual works based on a set of characters, the plot, or the storyline.
Merely continuing from where the original ended should in no way imply a derivation of works.
It is pretty well established that using the characters etc. of one work to make a new work constitutes copyright infringement (it would be a derivative work). (Quick Google search turns up: http://www.publaw.com/fiction.html) The new work certainly has copyrightable elements of its own, but that does not change the basic fact that the new work infringes the old.
The bigger issue in my mind is the license. It is generally the case that if someone gives you a license to property, and you spend money in reliance on that license in a reasonable and expected manner, then the license becomes irrevocable. If Vivendi granted Phoenix a license, and Phoenix spent money developing the game, I can't see how the new property owner Activision can just retract the license.
In both cases, it's idiotic to throw away all the non-copyrighted parts of the work. It can't use the IP? Fine, throw out the IP, and use whatever's left over to make something new. GraalOnline did this with the Zelda IP, for example. Any author who got their start writing fan-fiction knows the reality of throwing out all the "canon" characters and setting and realizing you still have a story. There's just no sense in letting it all go to waste.
They didn't copy or reverse-engineer stuff. They didn't abuse any existing copyrighted works but instead invested a lot in creating their own non-commercial sequel of the game.
They made a completely new game, with their own storyline and engine. The only reference to the King's Quest is that made it a sequel to the original series. Oh, they even dropped the name King's Quest almost a decade ago. In essence, the new game is an original copyrighted work by them.
There's something horribly wrong with that.
You shouldn't be able to "own" characters or a plot or a storyline: you should be able to own actual works based on a set of characters, the plot, or the storyline.
Merely continuing from where the original ended should in no way imply a derivation of works.