I'm not so sure the claim should fail. The authors of the game have moral rights in the work they have created. Moral rights give an author veto over modifications which would "object to derogatory treatment of the work or film which amounts to a distortion or mutilation or is otherwise prejudicial to the honour or reputation of the author or director" (see http://www.intellectual-property.gov.uk/std/faq/copyright/moral_rights.htm). Authors use this right to force book publishers to reprint books with serious errors; sculptors use this right to prevent interference with their art (there was a case in Toronto where a sculpture of geese had Christmas ribbons put around their necks and the creator of the art went to court to get them to remove the bows and won due to moral rights).

If this case were simply about reverse engineering, as it is framed in the story above, it would simply be another abuse of the DMCA however if moral rights are to be respected in digital works then authors have a right to demand that their works not be skinned with naked characters.

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