No, if that was their plan Magic Lantern would be buried under a sea of cease and desist notices.
Modifying something you own is not illegal.
Doesn't matter if it's legal or not. Canon has enough money to troll them into the ground using legal fees at the courthouse.
Funny legal system you have there.
In comparison, over here in South Africa, the courts have the sanction to award extreme compensation to the defendant on the grounds of malicious action on the part of the applicant. So, as my father always says: "Sue me, I can use the money."
You are right, it is a funny excuse for justice. In the US pretty much any decent sized corporation has a big enough legal department to destroy an operation like ML, not putting ML down one iota, but they know, for instance, not to touch the C line firmware. It has nothing to do with "modifying something you own" and to say that displays a chronic naivety of the way the US legal system "works".
I have said it before but I think ML and Canon have a symbiotic relationship that came about in a serendipitous way. Canon have benefited from ML's work, the 5D became a cult camera not least because of ML, their continued "tinkering" is accepted by Canon as the price for that indie film makers niche, which they are happy to profit from, Canon could close them out of the firmware without too much difficulty, but have chosen, even with new releases of non C cameras, not to. Similarly the bad publicity of Canon closing down ML is just not worth it, and it wouldn't result in any additional camera sales.
I believe there is a similar situation with Yongnuo, though punishing Chinese companies through legal means that do mail order from trading zones in mainland China is much more difficult. Yongnuo have cracked the RT protocol, they have even added functionality Canon artificially reserved for post 2012 cameras into pre 2012 cameras and even third party cameras. What result does this have for Canon? They sell more 600 EX-RT's. Heck it wouldn't surprise me if there was a "deal" between Canon and Yongnuo to delay the YN-600-RT for a few months as the cost for loss of sales of the 600-EX-RT once the YN-600-RT comes out.
But, surprise surprise, the bottom line in all situations is more camera sales for Canon.