From what I've read over the years it pretty much boils down to Fox getting really greedy and slightly loony. Claiming intellectual copyright on spaceships flying around and shooting at each other, for example. Something Flash Gordon was doing in the '30's.
It's also telling that they apparently never went after any of the Japanese or European knockoffs...
Remind you of anyone? ;)
Fox also wanted to sue over Hardware Wars, but Lucas thankfully talked them out of it, or so the story goes.