This isn't a good analogy. Creating and distributing cheats ruins the play experience for everyone. Making paper boats doesn't detract from anyone else's enjoyment of reading a book.
Now, creating and distributing cheats doesn't ruin the play experience for everyone. It's evident that it doesn't ruin the experience for those using the cheats. It's also possible that there are groups of people who wish to use cheats when playing separately from non-cheaters. Instead of suing this guy and shutting down the cheats entirely, I would suggest they should put those players on their own server, where they won't encounter any players who wish their experience to be cheat-free.
Hacking software and hacking an online service are not equivalent activities.
In real life games, say, a tennis match, you have someone sitting outside the playing field checking if you are playing by the rules, and stopping the game if you don't. That is the correct way to to things. You're not going to sue all the players that don't follow the rules, you just kick them from the playing field.