Wasn't it Infinity Ward who jumped ship from EA during EA's employee hating phase? While EA may have (somewhat) changed since then, I don't think they're about to go back. Still, I'd prefer to see that than Activision retaining the IP.

So they will basically do the same thing they did back then? Jump ship, start up a new IP that is almost identical to the previous one (there is a reason a lot of people couldn't tell Medal of Honor and the first Call of Duty apart from screenshots alone :p), and then keep making games?
That is why all of this is really making me suspicious.
Purely conjecture, but it sounds like the heads of IW wanted more money (because even they didn't realize how good MW2 would do) for a while. Activision kept calling them out on their contract (legally correct, but this is probably one of those cases where a few bonuses could be handed out). This continued (hence, the "insubordination" thing) and came to a head. Then the two heads of IW got fired, and Activision used security (really standard operating procedure for any important employees being fired) and the twitter-fest started.
At first, the heads of IW probably felt like crap (hence, the "Drinking, and unemployed" comment on Facebook) and were afraid they might not be able to get another job (the only companies who can afford anything of the magnitude that they would want to do/need to do are EA, Activision, and maybe Ubisoft) due to their behavior (and, chances are, they knew that Activision would blacklist the hell out of them, if only to avoid a competitor to MW3).
Then they saw that the gaming community instantly rallied behind "the underdogs", so they are hoping to spin this into a purely one-sided "Activision stole our MW2" angle, so that they can get public opinion on their side, and get the IP (which means companies will put up with primadonnas).
Again, purely conjecture, but it sounds right (based upon what little info we have).

Lol, warming up the popcorn machine right now.....

For those interested, the full filed complaint on kotaku.

Only this time they intend to not even bother changing the name of the series. :P
To address your conjecture, this is over allegedly unpaid royalties. That's not the kind of thing that you're about to make a mistake over. You'd certainly not get legal backing if there wasn't a case.

Heh.
Well, judging from what little info is out there, they are citing a fundamental public policy, not breach of contract. So it sounds like they have no legal right (binding contract) to this money, but they want to pretend they do. I am not a lawyer, but you would think there would be a less esoteric law they could use.

Typically you wouldn't get lawyer to support your case if all you had was Activision acting 'against common practice'. But yes, neither of us are lawyers and the details (despite having the full compaint) are still fairly sketchy at this point. My only real insight into Californian law is that it's insane. Which isn't very helpful.

Well, it sort of depends. If you have a good enough/dirty enough lawyer, and your goal is a settlement, this is probably enough (Activision would essentially be paying money to make this go away). But yeah, hopefully there is more to the case :p

If they think they have leverage enough to take the Modern Warfare name then they've got to have something good. Otherwise it would be thrown out of court so fast they'd break the sound barrier before their arses hit the curb.

And now we we enter the always fun 'He said, he said' portion as the two parties sue the shit out of each other. Weeeee.
It looks like both have a case. Activision was withholding royalties, but it looks like they also have documents showing these 2 guys trying to sell themselves (and possibly offering to bring staff and some concepts with them) to EA.

Maybe they can shore it up with GOG Sales. ;-)

Well, this would be the smart thing to do. If you have a very popular product, you're probably better off milking it than exploring new avenues and taking added risks. Case in point: Lucasarts - Star Wars. Thus, there's no incentive to take any other directions, as the concepts you mentioned are proven to be hugely profitable, given that upcoming products manage the same level of quality as is expected.
I'm not saying it's the optimal result for "users like us". I would love to see more creativity from big-name publishers, but alas we have to rely on the Indie scene for that. It's solely about what makes the cash. Often (and moreso, sadly) creativity != cash. Ask Andy Warhol about this. Or think of Psychonauts. Or Mirror's Edge - it's a great game, it's great to see a publisher like EA go off on a tangent for once - but it didn't really meet profit expectations. Many gamers are conservative too, after all, it's their cash.

To me this whole thing smells of huge egos and a seriously mismanaged firing. Companies typically do not want to end up in court over contractual issues, where a judge can basically rule however he wants regardless of what the contract says. And between attorney's fees and bad publicity it tends to be a losing proposition for everyone involved (aside from the attorneys). Thus when firing high level personnel it's often a common practice for companies to toss in a fairly generous severance package with various terms attached, basically spending a bit of extra money up front to avoid any problems down the line. Thus the highly visible dust-up we're seeing here strikes me as an ego battle between the IW heads and some Activision execs who then basically decided to escalate the thing to the very forceful firing of the IW heads. It'll be interesting to see what kind of additional details come out, and whether my speculation is even close to the mark.
Hey, at least it puts you ahead of all the folks trying to make sense of the laws in my state under the horribly flawed assumption that there's some kind of rationale, or even consistency, to them.

Which adds exponentially to how unpredictable the outcome will be.

Just wanted to re-emphasize this link to the legal brief that was filed. For the tldr crowd the juicy stuff is on pages 7-11, with the really juicy stuff starting at the end of page 9. If even half of the accusations in this brief are true then this seems like a shameless power play by Activision to 1) seize control of the COD/MW brands and 2) avoid paying royalties owed to Zampella and West for MW2 (the royalty payments were due to begin on March 31). To echo michaelleung's sentiment, grab the popcorn, this is gonna be good.