They really should have tried suing the developers that used their games to make money to stay afloat. Some of them made millions and never paid illusion a single dollar for their work that made it possible.
Firstly no one make enough with Illusion's studios to worth an international lawsuit. Even if the dev was sentenced to pay for Illusion's expense, it would need 10 years at most before they get back what they spent in the lawsuit.
Secondly it would have doomed Illusion even faster, because a big part of the sales where due to Japanese users who used the studio to make free fan fiction ; and not necessarily lewd one.
The real reason is that Illusion suffered from the spirit still present in too many Japanese small/mid business, they didn't cared about the international market. The company was created in 2001, and it's only with Honey Select, so around 2015 that they teamed with FAKKU to have none Japanese version of their games.
But at this time it was too late. They had an effective, and consistent, international players base, but it was built on piracy and fan made translation. And, of course, few seen a reason to change their habit and to pay for the games. This especially since generally the mods and pirated version where available in the same place.