In the initial suit filed by No Doubt, the band claims that while they agreed to license their likenesses for 'Band Hero,' they didn't agree to allow their likenesses to be used for other bands' in-game song performances.
In Activision's recent legal filing, the publisher defends a contrary position, arguing that the ability to "unlock" characters for use when playing other bands' songs has been a feature of its music games since 2005. Activision further claims that this feature is "publicly known," though does not mention whether this type of likeness-usage was specifically mentioned in its contract with No Doubt.
Activision also admits that while "it is possible to program a videogame whereby particular in-game characters can only be selected when certain songs are played, the Plaintiff first requested this only after the "Band Hero" programming was finalized, had been submitted to all of the U.S. console manufacturers for approval and had been approved for manufacture by most console manufacturers..." This particular bit of justification seems to imply that had No Doubt made its concerns known earlier, Activision would have been more accommodating.
The countersuit, filed in California Central District Court last week, denies any wrongdoing on the part of Activision. The publisher seeks compensatory damages from the band, alleging that on top of the likeness agreement, No Doubt also promised to help market 'Band Hero,' but was "unjustly enriched by its wrongful conduct against Activision, including by retaining money paid to the band for services it then refused to provide."
It'll be interesting to see how this all shakes out, and its fun to speculate; however, without being able to review the specific language in Activision's contract with No Doubt, sorting through this mess is still a lot like walking into spider webs.