Yeah, if the contract actually says what Crytek claims, CIG has agreed to stick their head in a pretty nasty vice.
Either everything they've done has been done to CryEngine, even if it has been modified beyond all recognition, which means Crytek is owed a bunch cash because of contractual licensing fees. Or they've changed to a different engine, which means Crytek is owed a bunch of cash because of contractual penalties.
Whichever way they move, they'll get squeezed — the only way out is to manage to disprove the interpretation of the contract.
Especially since, if anything, it could go the exact opposite way: Amazon going “you contributed what code… or should we say whose?” and then join in the punching because their codebase has now been tainted and needs to be vetted and purged (or just bought from Crytek… again). A licensee that forces the engine owner to re-buy the engine they thought they owned is not going to remain a licensee for long.