Lawyer here, who has done only the most superficial of skimming of the topic.
From what I can tell nothing has actually been filed against any of the individuals involved, so legal definitions don't appear to be terribly relevant.
To clarify though, in copyright actions, the prohibited use of works would be treated as an infringement of an exclusive right. In this case, an infringement of the right to distribute. Obviously, infringement is contemplated as being separate from theft. The legal remedies WOTC has at their disposal range from getting a court ordered injunction, fines, to jail time (unlikely). I'm guessing, given how minor the infraction appears to be, they are opting out of pursing costly legal action.
As for the bans themselves, in the legal profession we have an ethical duty to rat out anyone we know is violating our codes of ethical conduct (how often that actually happens....) or face disciplinary action before the state ARDC. This is contemplated as a mechanism to prevent people from simply looking the other way, and enabling unethical behavior to continue.
From what it looks like, WOTC is declining to pursue legal action, and taking the most light-handed approach they can: invoking a series of bans in accordance with whatever DCI rules allows them to do. I'm sure the fact that these were judges (authority figures within the game's structure) played a factor in WOTC's response.
It is funny that the community seems to be viewing WOTC as the ogre here, and not the people who were doing stupid things like infringing someones copyright.