So an update on the situation. SEGA and C2 has officially filed a lawsuit against MorningTec Japan, the company that publishes Abyss Horizon, in hope for an injunction to stop the game from distribution.

Here is the official respond of MorningTec Japan:

Obviously, they have denied that there is any infringement, and said that they are ready to resort to legal proceedings.

For those who do not know about Abyss Horizon, it is a new mobile game that closely resemble KC arcade. It has been released in Japan already. Here's some footage and screenshots: