500,000 copies sold is not insignificant. Nintendo fries even the smallest of fish. They'll literally go out of their way to fuck up someone's small hobby project only a niche few even care about. So if Nintendo is turning blind eye to a game that copied them in every way one could possibly copy a Pokemon game, then there's something else going on.

Remember, this is not a copyright case, this is a patent case. Considering Palworld is the only game vaguely similar to Pokemon in some minor ways that I've seen use spheres as a catching tool, I'm just (blindly) guessing it MIGHT have something to do with that.