The argument against it, presumably, is that "If you try and make us pay for committing crime, you won't get access to our toys anymore" is very strange and seems illegal, since the ability to play with toys should not stop anyone from reporting violations of the law.
But at the same time, it's definitely legal, for better or for worse, as is pretty much any stunt you pull with the joke that is US IP law.
This is not illegal in any country I can think of. Your take around what it exists to do is, IMHO, over the top.
I'm not aware of a country that requires you let people sue you in this sort of situation, or requires that you not terminate their contract if you do.
It is a civil issue rather than a criminal one, albeit still violation of law, which is why I used "crime" in the same way that the US government calls piracy and copyright infringement a crime despite it generally being a civil offense.
But at the same time, it's definitely legal, for better or for worse, as is pretty much any stunt you pull with the joke that is US IP law.