Computer communications predates the internet. We definitely knew about them. Nobody wanted to pay for them. Also, it was in everyone's best interest to informally standardize on a tool -- in those days, having to download an extraction tool in addition to the archive you wanted was a nontrivial cost (real monetary cost, not just opportunity cost of wasting more time).
Once SEA decided to start a legal fight, consensus was reached pretty quickly that nobody wanted to be the one jerk left using ARC. There were semi-organized grassroots campaigns to get laggards to switch.
The personal computer software world was less stringent about standards at the time, and the tool that worked well enough was always going to beat the tool that pleased the software engineers.
"SEA claimed trademark infringement on the name "ARC," and violation of their copyright on the "look and feel" of ARC's command-line user- interface, in addition to charging Katz with appropriating ARC program code."
The "look and feel" of the command line interface. By the mid-1990s people seemed to assume this only applied to GUIs.
I already know the zip format. Formats were not open then. You did not select archive tools based on the on-disk format it used; you selected archive tools based on a combination of software cost, compression performance, and network effects. Having multiple implementations of software that could work on the same archive format was a novelty which often resulted in legal battles, as the formats themselves were often considered proprietary information.
Once SEA decided to start a legal fight, consensus was reached pretty quickly that nobody wanted to be the one jerk left using ARC. There were semi-organized grassroots campaigns to get laggards to switch.
The personal computer software world was less stringent about standards at the time, and the tool that worked well enough was always going to beat the tool that pleased the software engineers.