So apparently Silicon Knights was developing a next generation continuation of King's Quest, at some point before Telltale got the license...
Apparently they got as far as a prototype before it was shut down, and it looks like it was probably built on the Unreal Engine. Hmm... I wonder what their direction would have been? Something that evolved from KQ8's direction of Action adventure, with puzzle solving?
Epic Game's lawsuit against Silicon Knights ended development on the game, and apparently the license shifted over to Telltale instead at that point.
As to the economic harm to Silicon Knights' reputation in the industry, the papers reveal Silicon Knights was in talks with Vivendi, Capcom, THQ and Namco and was negotiating development plans for King's Quest and Sandmim. Lloyd's methodology for determining the potential value of these projects was similarly unconvincing to the court. Lloyd's estimation of the costs of developing a new game engine were deemed irrelevant because Microsoft and Sega reimbursed the developer for all such costs, which gives Silicon Knights no ground to seek damages under North Carolina law.
Apparently they Silicon Knights was developing around the time the letter writing campaign started on The Silver Lining (perhaps this is the reason why Activision tried to shut it down in the first place?);