I don't think fines or legal issues are a concern for the manufacturers in China. Getting a watch at $498 retail means out of the factory shall be at least 30-35% lower than that. It all comes down to the micro milling costs per unit. High precision milling needs advanced machines, qualified staff, highly paid workers, higher QC process.. for everything there is an added cost. Replica market is highly cost sensitive and they shall not be able to sell high quantities if they add 400$-600$ just for a high quality engraving.
It all boils down to the price elasticity, if you open any TDs website almost all the replicas are in the range of $300-$500 apart from some outliers. The more expensive the model is, less likely to be sold in the open market. If we can form a group for PP and order 1000 or 2000 pieces with high quality finishing with engraving, hand brushing, good quality hands and more, we might be able to get several notches above the current product. But remember, you can only get 95% right at 400+ USD range for every 1% more accurate product the costs shall skyrocket.