
At least in the immediate case, the demo version of the game was released for free on the web by the original publisher to promote the game, as demos often are. Technically a translated version is a violation of the "do not reverse engineer" provisions in the README file (which, ironically, have been faithfully translated for the English README, heh heh), but it's probably unlikely that this will cause a major legal fuss.
The copyright issues surrounding a translation of a full commercial game are different, and often the solution is to only release a patch file with the new script so that users must first purchase the original game to play the translated version.
"The eleventh commandment was `Thou Shalt Compute' or `Thou Shalt Not Compute' -- I forget which." -- Epigrams in Programming, ACM SIGPLAN Sept. 1982