Personally I don't see a problem with this. That's their job title. Whether they have a P. Eng and can legally sign documents is another matter.
You are correct that technically they cannot walk around saying "I am a Software Engineer" unless they are a Professional Engineer. But I don't see the harm of someone saying "I work as a Software Engineer in X company" because:
- that's their job title
- the company chose the title and hired them for that role knowing their qualifications
- to my knowledge there are no legal restrictions on what title a company can give a role
If you want to go after someone calling themselves a "Software Engineer" when they're not a P. Eng I would argue you should go after the company for advertising an "engineer" position without hiring a P. Eng.
Edit: my argument here is that professional engineer licensing bodies should go after companies hiring engineering graduates to fill an "X Engineer" role the same as they would go after an individual falsely claiming to be a P.Eng.
It's stupid to allow companies to hire someone without a P.Eng to an "Engineer" role and then chastise the person for calling themselves by their job title.