Gah, I posted a comment and HN ate it.
Here's the gist: I don't know all the legal details because my dad and I are not that close. The company sued for "unfair competition" or whatever the legal term is. Since my dad's shop had the full specs and customer list of the die maker, they were afraid the engineers would cut out the middle man, so to speak. The die maker wanted them to stop building models completely and dispose of the printer.
I can't say if the printer was the only factor, but they never had a problem with the hand-made models.