If this is true, let's hope the game ends up being good...

Don't they still own the IP?

Yes. https://www.microsoft.com/en-us/legal/intellectualproperty/trademarks/en-us.aspx

Maybe Microsoft sold them the IP for $2

i have several mixed thoughts

1. there is no way this can be true, but also how could someone even make this up
2. i guess it was originally planned for the Wii so its possible, but the most recent development has been on Xbox One, so is it?
3. Platinum has had a great relationship with Nintendo since the Wii U so i guess thats not a barrier

Xbox fans wouldnt be happy thats for sure.

Not going to be much of an issue considering MS changed the game heavily which ironically means PG can just change the main character and make the game they originally envisioned.

If MS was clever they instead of having Scalebound's cancellation hanging over their head,they would be better off coming to terms with Nintendo and Platinum were they co publish the game on Switch, they at least gain something viable from the IP, they should make a statement saying they and Nintendo are partnering to bring the game to Switch, that way they maintain control rather than letting these rumors go on and on or worse seeing a Scalebound game whether it's called that or not on Switch with no involvement from them.

Nintendo wouldn't go through with such a thing not to mention Kamiya had a falling out with MS' higher ups over how they kept interfering with the game so PG wouldn't be keen on MS as it is. It would be better for Nintendo and PG to use the Scalebound name to make their own version following the original intended vision.

If Platinum or Nintendo successfully applied for the Scalebound trademark , would it even  be worthwhile  buying the IP from Ms would gaining  the use of the  story and characters be enough since you would think they wouldn't  use any of those art assets.