Pocketpair goes on to say that Palworld has been claimed to infringe on three patents held by Nintendo and The Pokemon Company and that part of the damage is required as compensation.
The first patent is one that most had guessed to be part of the case, as 7545191 refers to the process of capturing and befriending Pokemon, which Palworld apes with its Pal Spheres. The other two patents that are included in the lawsuit, 7493117 and 7528390 haven’t been found and detailed just yet, but they’re likely also mechanics in Pokemon games that are replicated in Palworld.
Probably just not big enough. Pokemon-like games are very common, palworld was just hugely successful and a lot of the media coverage for it was comparing it to Pokemon.