This is laughable! There is no way they really want this. In the long run they will be damaged considerably if this gets out as you couldnt buy this kind of advertising. My bet is that they are hoping you feel the Goliath bearing down and tuck tail and run.
The main issue seems to be the CDROM issue, which can be easily rectified, as all the information has been printed. Secondly, you are only quoting, and not reproducing complete works. I don't think they have a case, and are depending/hoping on the intimidation factor
What this really exposes is the effect the internet is having...it has been devastatingly effective.
Axelspeed