Nintendo's legal department feels it's led by a bunch of extremely spoiled and jealous children. This lawsuit is like the corporate equivalent of a child seeing what another kid made in art class and getting angry because it's better than what they made. Instead of learning from it and trying to create something even better themselves next time, they just trying to destroy what the other kid made so it doesn't make them look bad.

Also, apparently some of the relevant patents were filed by Nintendo after the release of Palworld, which makes it even worse. Unfortunately, since the lawsuit was filed in Japan and both companies are japanese, Nintendo will likely win by default.