It might just be they've got enough money to make them a juicy enough target to go after for damages. I can't imagine it took the lawyers this long to come up with something to sue them over, and the game didn't exactly fly under the radar... so I'm not sure what else it could be.

I suppose there might have been a flurry of scary lawyer letters being sent back and forth and the lawsuit only happened once negotiations broke down.

It's probably because two months ago PocketPair announced a joint venture with Sony Music and Aniplex that includes merchandising. [1] The revenue from the Pokémon games is nothing compared to the revenue from merch; Pokémon merch generates more revenue per year than Pokémon GO generated over its entire lifetime. [2,3]

Thus Nintendo is likely more concerned with consumer confusion between Palworld and Pokémon merch than between the games. On top of that it would damage The Pokémon Company's position in any negotiations surrounding merchandising agreements, because partners can use a potential Palworld merch deal as leverage to get a better deal from The Pokémon Company.

[1] https://palworld.co.jp/en/news/?article_id=65768

[2] https://www.pocketgamer.biz/the-pokmon-company-caught-108-bi...

[3] https://www.pocketgamer.biz/pokmon-go-catches-nearly-8-billi...

Nintendo posted an announcement about "we're looking into this" around 6d after the game was released, so I imagine they were thinking carefully about the cost/benefit and whether they could win.

For the curious, Palworld was released:

Initial release date: January 19, 2024