you don't get money to expand your manufacturing facilities when someone else just copies your design because you're too stubborn to make a deal
Discussion
The gun industry in that era was full of make it now wait for the lawsuit later and kel tec being the way smaller company most likely did not have the resources to sue ruger and stay afloat or did not care. It was so big and popular at the time even S&W just released a glock with no license and went ok it will take like 5 years for this suit to be settled.