The counter-lawsuit filed by Activision Blizzard made truth come from Infinity Ward heads Jason West and Vince Zampella that yes, Modern Warfare 3 is already in development. Activision claims that both the heads of Infinity Wards were delaying the game development so that they may use it as a weapon of negotiation. It is also alleged that both of them met members of their “competitors” EA and made a plan to delay the game.
On the other hand, Modern Warfare 3 is rumored to be set in Vietnam War. The likely release date for the game is said to be somewhere in 2011, assuming the current situation calms down soon.