The lawsuit didn't actually have anything to do with TorilMUD.
Back in 1991 or something, a group of people at Copenhagen University created DIKU. It was a MUD, a text-based game vaguely similar to any given MMORPG, and it was so popular that they released the source code in the form of a DIKU stock that anyone could download and build their own MUD around. It was nothing more than the foundation of a game, barely playable until re-designed, and it was free to use and modify in any way you liked provided that you did not make money from it.
TorilMUD (previously Sojourn, Sojourn II etc.) was a DIKU-based MUD, and Brad McQuaid played there. Toril was very popular at the time and had hundreds of players, so Brad got the idea to adapt the concept into a graphical game. The owners of Toril agreed to let him do this, and so he created Everquest. The similarities between Toril and EQ at the time were huge, from classes and races being almost identical to the gameplay being pretty much the same. The only real major difference is the actual game world as Toril is set in the Forgotten Realms setting which is the intellectual property of Wizards of the Coast. TorilMUD is still running to this date, however it is a shadow of its former glory in this generation of WoW and all that.
Since Brad McQuaid's source of inspiration was a DIKU-based MUD, EQ shared obvious similarities with various elements incorporated in most MUDs. However, while they were primarily just similarities that are now considered standard elements in all MMORPGS, a few things were identical, most importantly the stock emotes. Even though these were fairly inconsequential to gameplay, the fact that they were mostly copy-pasted from the DIKU stock caused some concern that more than just the text echoes from /smile and /yawn etc. had been appropriated from the DIKU code.
Since the DIKU source was freeware with the condition that you make no profits from whatever product you modify it into, it turned into a legal case (although I don't think it was the owners of DIKU who initiated it) which was eventually dropped as it turned out that nothing else had been used, and the stock emotes had been kept more for nostalgia's sake than to steal from the work of others. Since DIKU is 100% text-based, the source code would not even have been compatible with a graphical MMORPG to any relevant extent.
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