On September 19, 2024, Nintendo and The Pokémon Company filed a patent infringement lawsuit against Pocket Pair Co., Ltd. together. The lawsuit alleges that Phantom Beast Palu infringes a number of patents and seeks an injunction to cease the infringement and damages.

"Phantom Beast Palu" is an open-world survival and pet raising game, which features the ability to train captured pets to become helpers in base construction, and even realize automated assembly line production. The game sold more than 10 million copies in the first month of its launch on Steam, and it has also become a phenomenon in the Chinese market, with cloud service providers such as Alibaba, Baidu, and Tencent even launching exclusive online server rental packages for it.

While "Phantom Beast Palu" is popular, there are also voices worried about its infringement risk. Many players have said that Palu is a game where you can see that its pet looks are borrowed too much from Pokémon images just by the naked eye. But Pocket Pair's pet design is original, designed by a "genius" female artist whose production capacity is much higher than normal.

However, this far beyond common sense explanation is not entirely convincing, and "Phantom Beast Palu" is accused of using AI to assist in the design of pet images. Pocket Pair denied this and strongly stated that it would not use generative AI in the future. In a media interview, Pocket Pair CEO Takuro Mizobe announced that Pocket Pair makes entertainment products and doesn't want to pursue something that makes people unhappy, so he hopes to keep a certain distance from AI.

On January 25, 2024, at the same time as the explosion of "Phantom Beast Palu",Pokémon posted a notice on its website titled "Inquiries about games from other companies." "We have received a lot of inquiries about games similar to Pokémon released by other companies in January 2024, as well as inquiries to confirm whether they are licensed by our company and we do not allow any use," they said. We will investigate any infringement of intellectual property rights related to Pokémon and take appropriate action. But there was no news after that.

The popularity of "Phantom Beast Palu" continued into this summer. On July 10, 2024, Sony Music Entertainment, Aniplex, and Pocket Pair announced the establishment of a joint venture, "Pal World Entertainment". The company is taking steps to promote Palworld's licensing business nationally and internationally.

At the end of July 2024, Takuro Mizobe also participated in the ChinaJoy exhibition in China with "Phantom Beast Palu", in addition to renting an exclusive booth in the venue, Takuro Mizobe also attended the TDS conference on the eve of the exhibition. Takuro Mizobe said that when designing Palu, he would attach great importance to whether Palu is cute or not, and the plan designed on this basis should be evaluated by "non-professionals" through internal voting within the company, and it will be continuously iterated.

According to VGC reported today, both Nintendo and Pokémon Company stated in the announcement that the reason for the lawsuit is that the "Phantom Beast Palu" developed by the defendant Pocketpair infringes a number of patent rights, but this is not very consistent with the most controversial "Palu Plagiarism Pokémon Design" that has been the most controversial among players before, because this lawsuit is a patent lawsuit, not a copyright lawsuit, which means that Nintendo is likely to focus the complaint on the gameplay, rather than on the similarity between Palu's character design and Pokémon design.

Interestingly, after the lawsuit came to light, the Phantom Palu community manager posted a smiley face emoji on X — a tweet that has since been deleted.

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