I don't think a lot of people downloaded the unfinished source code, compiled it, played the game and never bought the conplete game.
The worst that happened were people making memes with some 3d and graphics assets which didn't cost anyrhing to Valve. Quite the opposite it was free advertising.
Makes perfect sense just has nothing to do with justice.
Imagine that intro scene in HL2 where you walk through a trap door Pepsi vending machine and behind it there’s a lab - and instead of talking about HL2 stuff, Alyx and company talk about sampling and testing local natural water sources.
I imagine that if I branched out in gaming it would have been a nice bonus, it's not everyday you get to see the competition's code. I suppose they lost in opportunity cost to license their thing, a bit ?
Some people might have tried, but that doesn't sound like it was a great gaming experience. If it ran at all.
You cannot compile that and get a fully working engine.
It's a bit like claiming the Win32 API is the Windows NT kernel.
You can read more about the modding workflow here: https://developer.valvesoftware.com/wiki/My_First_Mod
If you are familiar with the latest version of Unreal, then it's like having access to the "Games" project in your solution and only some headers from the "Engine" project.
I think my buddy burned it to 3 CD-Rs and it spread around my gaming friends in HS pretty quickly.
It wasn't a proper game yet for sure, but as a 2003 tech demo the beta was one of the best, you could recreate the legendary E3 demo [1].