Actually I'm not sure what Swatch was expecting. If you do business in another nation, you're bound by their societal norms and laws there. My country Malaysia is none to "gracious" to open displays of LGBT. That is no secret. That's why for most LGBT Malaysians they keep a low profile. Is it ideal? No, but it what it is.
To openly promote LGBT is asking for trouble. So is it any of a surprise Swatch LGBT watches got confiscated. The fact that they got away with it in previous years does not mean that the government is okay with it. Just so you know Malaysia is 60 - 65% Muslim. They are also quite religious.
One may see it as standing up for the minority LGBT in Malaysia. However the flip side will see it as a disrespect of local customs and sensitivities. What you feel really depends on which side of the fence you're on. But one thing is for certain, it was a foolish move. Malaysians are not ignorant of what is happening in the west. You can bet every last penny that we know of the "displays" in the Pride Marches.
I'm not seeing any chance that Swatch's filing going anywhere. To make things worst for themselves, they have gotten into the radar of the authorities. They will definitely find it harder to import their watches into Malaysia even if the models are not LGBT ones.