IANAL, but I think the difference there is that game was standalone and playable without a ROM file. Theoretically, a ROM patch and a bunch of netcode would be legal (though most people would still illegally obtain the ROM to patch).

E.g. see Project Slippi[1], a patch for playing Melee online with rollback netcode.

Interestingly, a tournament using was Slippi was issued a C&D[2], but Nintendo has issued C&Ds to Melee tournaments in the past just for using their graphics and making money and stuff.

[1]: https://slippi.gg/

[2]: https://twitter.com/TheBigHouseSSB/status/132952108157785703...