Nintendo is infamously litigious and basically always has been; in 1987 they threatened to sue the developers of The Great Giana Sisters for publishing a game that wasn’t dissimilar to Super Mario Bros. No lawsuit was filed but the game was withdrawn from production. They’ve issued cease and desist letters to makers of fan games, other game developers, fanartists, hell I’m surprised anyone anywhere even tries to work with them.
Given the substantial resemblance of Palworld’s creatures to Pokemon and their “No Unapproved Fun” stance to everything I am not alone in being surprised Nintendo hasn’t tried anything.
The one thing that connects all those points and examples is that Nintendo has not sued anyone, non of that was ever taken to a court. Because in a lot of this cases the chance to loose was substantial bigger then zero and a ruling against them would have had major implications.
So yes, they bully, they use the tools like DMCA (and EUCD in Europe) claims and takedowns, and stern letters from their lawyers but only when the chance for winning is really high they will go to a court to sue. Why go to a court when you know that the person on the other side will cave in, not because you are right but because the costs for them to get right would be way to high.
The chance for loosing in this case is really high and the last Nintendo/Pokémon Company wants is a judge to rule that the designs are not that distinctive or “original works” at all.