Scratch was originally being developed by 7 Studios, but following Activision's purchase of the developer, Genius Products terminated the agreement. Activision and 7 Studios were then ordered to turn over the source code for the game and its development tools. nope
"[The code] is theirs. It belongs to [Genius and hardware maker Numark]. They paid six million dollars for it," said Judge James Chalfant, reports Gamasutra. "I'm done."
According to Kotaku's sources, Scratch is now under development at BottleRocket, which recently made headlines when its Splatterhouse project was confiscated by publisher Namco Bandai and then handed off to another developer.