There was no lawsuit, Honda were rumoured to have voiced an opinion that they felt the R moniker belonged to them. However VW use the R-Line on their top spec models too. So it's never been challenged.
Much like Ford spat their dummy out when Skoda called their early hot Octavia's RS. That was quickly changed to vRS. Because it's believed Ford di actually challenge the usage.
SEAT we believe chose to drop the R line, because the R really didn't make sense as it technically means 'Racing' Yet the Cupra means 'Cup Racing' So what they were saying is that they were calling them Cup Racing Racing. Which is just daft.
SEAT's official line is the R range is a unique identity for those models in their range than have been directly engineered by their in house racing team SEAT Sport. The
Ibiza R and Leon R were essentially in-house projects while SEAT took a sabbatical break from competition motorsport.
When they pulled out of Rallying the
Ibiza F2 and Cordoba WRC in the early part of the decade. The team then put their skills to engineering an enhanced special edition limited run
Ibiza Cupra R. With the success of the
Ibiza R, they decided to do another project this was the Leon Cupra R.
The Leon Cupra R had more of a factory involvement, hence the numbers that were produced. They had parts fitted and prepared by the SEAT Sport engineers after the cars were mostly assembled on the production line.
Since then, the focus of SEAT Sport turned back to a full time motorsport project with the Leon Cupra Championship and Spanish SUpercopa series, which in turn led onto European Touring Cars and the Toledo, which then spawned the BTCC project. Which in turn led onto the Leon WTCC/BTCC New Supercopa etc etc the rest is history as they say.
SEAT Sport no longer have the time or staff to focus on a full in-house project for anything factory inspired at the present time. They get involved with the hot versions to
help develop the chassis etc but they no longer prepare cars as they once did.
In the future that might change, and the R line may reappear. But don't hold your breath!