I was absolutely dumbstruck that they would spend the time and money to search out and C&D me on such an inconsequential item, an 8 year old compiler. Even more ludicrous is that this compiler was released as open source not too long ago. It is possible that people whose code was not included in the open source release might not like it to be distributed without permission, but they claimed to be acting on behalf of Sybase. The people who open sourced Watcom in the first place!
I removed the file after an fruitless email exchange and several calls from my ISP. It's just not worth the bother to fight the copyright cops, no matter how illogical their actions are.