It's a little less dramatic than that. They did send a demand letter to automatic.css saying that since 'automatic' and 'automattic' differ by only one letter, are pronounced the same, and are marketed to similar groups the name is likely to cause confusion, hence automatic.css should change its name.

Which is not the same thing as claiming the word automatic generally.

Personally it sounds like a loser if they took it to court since (a) automatic is a common word and (b) they already asked automatic.css to add a "not affiliated with word press" disclaimer (which automatic.css did add). IANAL.