Well, not quite, but close enough. If they "win", then they'll be in breach of their license to use Linux and any other GPL software. So they can distribute their routers, but not with those components. This is mentioned in the FSFE press release:
'"Ironically, by preventing others from enacting the rights granted by the GNU GPL, AVM itself is in violation of the license terms. Therefore they have no right to distribute the software" says Till Jaeger [from JBB Rechtsanwälte who represents Mr. Welte in this case].'
I'm sure Harald Welte is well aware that if this suit is upheld, he can use it as the basis for a counter-suit against AVM for violating his copyright on his portions of the kernel.