Aye, this does seem to the crux of the dispute. Many researchers have always acted as if the PI is the owner ... but that's not what the grant language typically actually says.
So I conjecture that is what the Court(s) will have to decide "is the grant language (and germane government policy documents) to be read as written, or reinterpreted as has been the custom?"
Once upon a time, Courts gave a lot of weight to the language as written. Sometimes they still do. Other times, they seem willing to pretty much turn the language on its head. IANAL and its unclear to me just when they decide to set aside the language as written and when not to.
Given the $$ in play (both directly and for downstream royalties) I'm sure neither Institution is going to give up easily. The implications for other researchers will be far reaching ... so I will be surprised if a bunch of amicus briefs aren't filed.