There are many people who feel that manipulating animals is unethical. These people will very likely try to sue you if they find out what you are doing to the mice. As far as ethical concerns, the question is whether or not the mice will be suffering.
Well, with knockout mice, you are manipulating the genes of the mouse and "knocking" one out by hiding it through breeding. Some would say, ethically, that is "playing God". And depending on which gene is being removed, it could cause serious health problems in the mice.
As for legal concerns, there will need to be large amounts of mice in order to do any sort of publishable work. That means they need to be housed and fed and overall treated legally. If there are experiments being done on the mice, the protocols will need to be approved before animal research can legally proceed.