Even with the official court documents, it is still hard to get a view on where the lawsuit stands on Watchmen. Both studios are convinced they are on the right side of the argument but, coming from a spectator, there is some suspected shadiness from both sides too. Maybe this article can help clear things up.
Source This: Watchmen Lawsuit
Andrew Steve Harris wrote an article brilliantly titled, "The World Will Look Up and Say 'Sue Us,' and I'll Look Down and Whisper, 'Okay.'"
The report gives a rundown of the Watchmen lawsuit that not only compiles the news we've heard so far, but gives an easy (to understand) account on what we've heard. A snippet:
At some point late in the game, Time Warner believed it had finally stitched them all back together, and gave the go-ahead to produce the film. But Fox, involved in the slicing-up and passing-around at some point in time, believes it still owns a shred of the original rights–and perhaps the most important shred, like that one piece of newspaper clipping that finally lets you solve the crossword puzzle. Whether it actually owns that puzzle piece will now be up to the court to decide.