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I guess I'll chime in, being the resident lawyer (more specifically, one who works in copyright).
First, to answer the questions posed in that AICN link, the case was decided on summary judgment - the judge felt that there was no material question of law or fact that needed to be adjudicated.
I'll shed some light on the issues (keeping in mind I haven't had access to the briefs yet).
A. What is a copyright and how do they work?
A copyright protects an author's original expression of a dramatic, artistic or literary work. An author's copyright includes a bundle of rights including the right of reproduction and the right adaptation. Unless a party has permission to reproduce or adapt the author's work from the author (or whoever holds the copyright) any reproduction or adaptation constitutes an infringement for which the actor is liable. Simple enough so far, right?
Copyright, like any kind of property right, is alienable (meaning it can be transferred from one party to another) in the form of assignment (which is a complete transfer of specific rights - assignments NEED TO BE IN WRITING) or a license (which is a permission to use the work, not a transfer of the legal interest. Permission need not be in writing, since it is not permanent). Regarding assignments (since that is what the issue of the Watchmen case concerns), an author (more specifically, the copyright holder) can control exactly what legal interest they are assigning. For example, the right to adapt Watchmen, the right to distribute Watchmen in the United States, the right to produce merchandise, etc. An assignment ONLY INCLUDES the copyright interests specified in the agreement; no more no less.
B. What are the rights of the parties?
1. Warner Bros
Warner Brothers' case, it seems to me, is that Lawrence Gordon - the producer of the project who facilitated the purchase of the Watchmen copyright in 1986 as a Fox employee - holds the right of adaptation and the right of distribution.
As far as I'm concerned assuming that Gordon is the holder of these rights when Warner Bros should have known about the subsequent agreements, of which I'll explain soon, is inexcusable and they deserve to lose this case. Like I said, I'm not privy to all the facts but it appears to me that WB's lawyers simply didn't do their homework and their subsequent claim of fair use when fox sued has absolutely no basis in law. I'll get to that in a bit too.
2. Fox
Fox owned the critical copyrights by virtue of their purchase in 1986. In 1991, a deal was struck that assigned some of the rights to Gordon, exactly which ones are not available to the public yet though I assume them to be conditional rights of distribution and adaptation, which would allow Fox to retain distribution and sequel rights to the film, and a share of the profits if it were to be made by another studio. Moreover, the Watchmen project was put into turnaround in 1994 and the turnaround agreement allegedly says that Gordon would not fully control the assigned rights until Fox had recovered its development costs on the project (the condition on the rights we are currently unsure of, but include the critical rights of adaptation and distribution). Moreover, the agreement stated that if Gordon changed any of the key creative personnel on the project, Fox would have a first option of participation.
Recap: Fox had the rights to adapt and distribute Watchmen; in 1991 they transferred some of those rights to Gordon (on the condition that Watchmen were produced by another studio, they would retain distribution, sequel rights to the film and a share of the profits). The 1994 turnaround agreement purports to grant Gordon the right of distribution and adaptation when Fox's development costs are reimbursed and it gives Fox the right of first option of participation if Gordon finds a studio to produce the film and changes any of the key personnel attached to the project.
C. The events and the legal issues
1. In 2005, WB agrees to develop. Also in 2005, Snyder was brought on as director, a move which Fox alleges they were not notified of.
Issues:
First we need to know if Fox recouped development costs on the project. If no, Gordon has no right to adapt or distribute the Watchmen. If yes, then Gordon has the rights pursuant to Fox's first option of participation clause if any key personnel are changed.
Assuming Fox recouped the costs on development, the Snyder hiring should have kicked in the 1994 clause that would give Fox the right of first option of participation. Since they were not informed, Gordon is in violation of the agreement and liable for any damages arising from his breach of contract.
2. Fox alleges that it contacted WB before production began and informed them of the 1991 and 1994 agreements with Gordon. WB says Fox declined to develop the screenplay that was the basis of this project and therefore waived their right of first option of participation. Then WB claimed that the 1994 agreement did not cover distribution rights and that Gordon had all the rights he needed to take the film to WB. Moreover, WB says that Fox failed to to exercise its rights over various incarnations of the production.
Issues:
First, Fox has a 3 year statute of limitations which starts running when infringement occurs. WB is claiming some form of fair use when they say "Fox had a chance to stop this train from charging ahead and they didn't." The statute of limitations exists for this very purpose. Fox was well within its right to exercise their rights as long as they filed a complaint within the statutory period. In fact, it's nothing but smart business strategy for Fox to wait until the film is produced so they can cash in on the project. If indeed Fox told WB of the agreements and WB simply ignored the warning...well, that makes WB's lawyers pretty fucking stupid for not reviewing the contracts properly. Fox didn't even have to do that, so even if notice of the agreements by Fox didn't take place, you assume that Gordon knows of them since he is a party to them and is liable for the breach. Regardless of whether or not he remembers, he should and he's stupid for pushing forward knowing the consequences of a breach.
It doesn't matter that Fox declined the produce that script; that they were not notified (allegedly) of Snyder's involvement constitutes a breach of contract of which Gordon is liable. Any waiver of a right, especially a copyright, must be explicit. There is no explicit waiver here, especially of that particular condition. WB loses this defense.
Whether the 1994 agreement covered the right of distribution is a question of fact. I don't have access to the contract so I cannot say whether it does or not. Since the judge ruled via Summary Judgment that there was no question of fact with regards to that issue, I'm going to assume it did. Remedies available to Fox include an injunction, which prevents WB from distributing the flick in the US (and paramount internationally); or recovering lost profits from its distribution. The film is going to be delayed regardless, so the public will feel the effect of the former, and Fox will recover its share of the profits when the flick is eventually released.
The bottom line is this: does this suck for fans? Yes. It really sucks since you might not see this film for another year at least. However, pissed off fans should direct their anger towards WB and their extremely ignorant lawyers - from what I gather from the litigation thus far - not Fox. There's a reason this kind of stuff doesn't happen very often; lawyers and parties to the agreements typically do their due diligence, cross their T's and dot their I's. WB seems to have dealt with this in a very haphazard way...and they paid for being stupid.
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Who FUCKS the Watchmen? 
