I'm not really sure that the copyright/trademark/patent of Killer Instinct is all that clear and is wholly owned by MS. I think Nintendo might have some claims in the ownership, I distinctively remember KI/2/Gold and Cruisn'USA/World (I think this was developed by Midway and Nintendo) being part of the whole Ultra 64 thing in the Arcades that would be ported perfectly into the Nintendo 64.
Now I'm not sure, but I think Nintendo helped develop those games. Plus Midway published those games in the Arcades, so they might have a share of that pie too. I think that's why we have never seen a new KI (and Cruisn for that matter) games on XBox/XBL or Wii, because it's not wholly owned by one entity, whereas other Rare developed titles like PD, Conker, Banjo, DK, etc have clear owners and have been released since Nintendo and Rare parted ways . Again, this is just an educated guess on my part, I might be completely wrong (probably am).
EDIT: I know I might be going off topic, but all this KI got me curious as if I'll ever play my favorite fighting franchise ever again. I did some more digging and maybe
Nintendo owns the copyright? Or maybe it's
Nintendo/Rare? BTW, a copyright is valid for 70 years AFAIK.
EDIT2: Was wrong, it says ©Nintendo/Rare on all 3 boxes, not just the N64 one.