Terrible news.

I wonder if "the company" could force an app like Gordian Knot to cease development too.

Finally, since I was "blessed" by an official information email that the company that shut down DVD Decrypter development demanded be sent, I can let the cat out of the bag: it's not the MPAA, it's not Sony as initially rumored. It's Macrovision - the company that has given the world video signal corruption since the 1980's. The email states that we're dealing with a case of copyright infringement, which I find hard to believe. On a DVD, there is no Macrovision signal. There is a flag in the bitstream that tells your player to turn on the signal that screws the automatic gain control on your VHS recorder, and DVD Decrypter can remove that. But it's not like DVD Decrypter is the only program to do that, there are a great many programs out there, some of which cannot even decrypt DVDs, that can remove the Macrovision flag. And it's not like the flag matters when you make digital copies, you could simply keep it. For instance if you're creating a DVD?R from a store bought DVD, if you don't touch the flag, you couldn't make a VHS copy of your DVD copy.
I'm unaware the DVD Decrypter would be able to add the Macrovision flag to a ripped video. That would be something else since in order to use Macrovision ACP, you have to pay a license fee, and without paying it, you'd be committing some sort of violation (likely a patent violation since ACP is patented). And Macrovision has sued at least one other company over this issue in the past: 321 Studios. That case didn't go to trial because 321 Studios eventually shut down operations under pressure from a previous lawsuit by the MPAA. And as far as the DMCA is concerned, a simple bit in a stream cannot possibly be considered an effective copy protection mechanism as defined under the DMCA, unless you have no idea about technology (obviously most lawyers fall into that category). This is even more laughable than using ROT-13 "encryption" (and still, ROT-13 was used as "encryption" by Adobe).

After shutting down DVD Decrypter, Macrovision is suing again: The charge is patent and DMCA infringement. The companies concerned produce devices that permit analogue copies despite corrupt video signals (AKA video signals with the Macrovision signal). I guess the defendants will argue fair use exception, the courts will issue the injunction and the whole thing will be settled out of court as usual. And, the patent infringement charge sounds as bogus as always (any halfway skilled A/V technician knows how to replace the corrupt signal with a clean one, and it doesn't require knowledge of any patented technology). In fact, high end video recorder used to be unaffected for a long time, and I still have an old VHS set in the attic that is also completely oblivious to Macrovision's signal corruption.