I'm no expert, but could they legally do something like that? basically just revoke their right to continue using the Unreal Engine.
I imagine they can. However I'm pretty sure they get a cut of games developed on their engine so they may just use pubg's own money to slap them down and continue to take a cut of future sales.
Iirc hatred from banned from using the unreal engine logo. Would assume they have given themselves the ability to prevent people using their product as well.