Portal 64 taken down by Valve [video]
youtube.com
youtube.com
I also don't buy the idea that Valve "had to" force James to take the project down, they could've just ignored it without supporting it?
And if trademark was the issue, where does the libultra stuff come in?
Also, the aggressively protect your trademarks or lose them thing is a myth.
It's not. For example, Bayuer lost their trademark for aspirin due to genericization.[0]
For more context about copyright, trademark and patent protection by videogame companies and their motivation - I recommend this excellent on-topic video essay by a real lawyer[1].
A trademark might still be generic-ified even if the holder attacks every use of it.
If Valve ignores this one, and decides to attack some other project selling something with a Portal trademark on it, the courts won't look at this case and say "but you didn't do anything that time".
The whole premise of "defend it or lose it" is a misunderstanding of how trademarks becoming generic.