That’s what I get for summarizing. The details are that Ace claimed the copyright was invalid. There was a rule at the time that if a book was published outside the US, and more than a set number of copies were imported before US copyright was applied for, the book was public domain. That number of the UK hardcover were imported, allowing Ace to claim the book was public domain.
Tolkien and his publishers certainly would have sued if the book was under copyright, but he was unable to. Instead, he made small changes to the original – primarily adding maps and other appendix material (these were not in the Ace edition), which allowed him to copyright that edition.
Then Ballentine bought the book and published it. If you notice the earlier editions of the paperback, there is a plea from Tolkien on the back cover to buy that edition, and not any other (again, if he had a copyright claim, he wouldn’t have needed to do so).
Ace discontinued the edition due to pressure for the Science Fiction Writers of America, who made Tolkien its first honorary member.* The title was created for Tolkien because SFWA took the position that the Ace edition didn’t constitute being legitimately published in the US and since he wasn’t published in the US, he was ineligible for regular membership.** SFWA threatened to no longer make Ace a qualifying market, and the organization – which consisted of the people who supplied books to Ace – had enough clout to convince Don Wollheim to discontinue the edition and pay Tolkien his royalties.***
But, ultimately, if the books were under copyright, Tolkien could have stopped the publication at once instead of having to have SFWA go to bat for him.
Now, in 1993, the court made a decision that was retroactive, but in 1965, all parties involved believed copyright had been lost.
*That led to the Stanislaw Lem problem, but that’s a whole other issue.
**Once the Ballentine Books edition came out, Tolkien joined as a regular member.
***Wollheim claimed he always intended to pay Tolkien, but didn’t know how to contact him. :rolleyes: