Killer Instinct was a trademark of Nintendo up until last year when they cancelled it. There is no live trademark in the US on the KI name (with regards to fighting games) right now.
Can you link an official source please?
http://tarr.uspto.gov/servlet/tarr?regser=serial&entry=74506654
EDIT:
Also, there is a copyright on file for Killer Instinct and it has Nintendo as the Copyright Claimant. Nintendo is claimant for the copyright for the Coin-op, the home versions, packaging, and manuals.
That doesn’t mean it’s impossible for a new one to be made. Just that Nintendo appears to still be in control of the copyright for the games.
I like KI
I would consider this, an ‘official rumor’. Rare initiated the rumor, an ‘official’ source.
However, I’m not always entirely serious.