Well, it looks like he just settled it, and agreed to not endorse any of Sony's competitors for two years...
As part of the terms of the settlement, Lambert admitted that the advertisement may have caused confusion and that his contract with Sony meant he was unable to promote products from other video game companies.
Lambert has agreed to spend the next two years not appearing to promote "any other video game or computer entertainment system or video game company." Once Lambert's two years on the naughty step have played out, he has also agreed to spend the next two years giving Sony the heads-up in any subsequent advertisement which endorses a competitor's product.
The Kevin Butler character still remains in the possession of Sony, although we haven't seen them using the character in a while...
Damn you Sony. When are you going to leave people alone. Have you never heard the term "Live and Let Live"? I can see why this scene gets a bad rep... look at the official guys. What a joke, Sony; and no one is laughing. In fact, we are all very very sad for you.