What Do Changes to Palworld Mean for the PocketPair/Nintendo IP Dispute?

I have been following and writing about the ongoing legal battle between Nintendo / The Pokémon Company and PocketPair over PocketPair’s popular video game Palworld[1]. This past week, PocketPair published a blog post addressing some of the recent and upcoming in-game changes.[2] The PocketPair blog post is worth analyzing vis-a-vis Nintendo’s recently filed U.S. patent applications.

PocketPair communicated three important things:

1. That it “continue[s] to dispute these [patent infringement] claims and assert the invalidity of the patents in question.”
2. That its v0.3.11 patch to Palworld (which “removed the ability to summon Pals by throwing Pal Spheres and instead changed it to a static summon next to the player” and implemented several changes to “other game mechanics”) was “indeed a result of the ongoing litigation.”
3. That its upcoming v0.5.5 patch to Palworld (which will change “gliding” such that it is “performed using a glider rather than with Pals”) represents “yet another compromise” in order to “prevent further disruptions to the development of Palworld.”

While the only currently pending litigation is in Japan (i.e., there is no counterpart patent infringement litigation currently pending in the U.S.), Nintendo’s U.S. patent applications are sister applications to the presently asserted Japanese patents and cover similar game mechanics. Further, to my knowledge, the version of Palworld presently playable in Japan is identical to the version of Palworld playable in the U.S. Hence, any changes made to Palworld to avoid Japanese patent infringement may also assist with (e.g., be done with the purpose of) avoiding U.S. patent infringement.

It is important to note, however, that PocketPair’s modification of game mechanics is not an admission of infringement of the U.S. patents. This is especially true when coupled with PocketPair’s statement from the blog post that PocketPair “continue[s] to dispute” the patent infringement claims. Further, while modification of game mechanics is not an admission of infringement, neither does it insulate PocketPair from liability for any previously committed acts of patent infringement. Instead, PocketPair may simply be taking steps to mitigate risk moving forward.

For example, should it ultimately be determined that PocketPair committed patent infringement in the U.S., multiple remedies could be applied.[3]

1. Reasonable royalty: A reasonable royalty is determined based on both a “royalty rate” (e.g., the monetary value per unit of infringing product sold that is attributable to the infringing feature) and a “royalty base” (e.g., the number of units of infringing product sold). The shorter the amount of time that an infringing product is for sale, the less the so-called “royalty base.” For example, any copies of Palworld sold after any infringing feature has been removed from the game could not be included in the “royalty base” (since those copies were not infringing). Hence, PocketPair could be amending the features to protect against a higher monetary judgment should it ultimately lose a patent infringement case.
2. Injunction: PocketPair may be enjoined (i.e., judicially forbidden) from selling products in the future that include infringing features. Thus, to prevent future software development / game design time being committed to removing infringing features, PocketPair may simply be proactively removing allegedly infringing features now. Likewise, removal of such features upfront may both: (i) preemptively adjust player expectations regarding those features and related features being included in-game; and (ii) prevent additional game features that rely on the underlying infringing features from being developed in the interim (i.e., between now and any infringement judgment).
3. Treble damages: PocketPair may avoid treble damages in the U.S. by removing the features in question now (i.e., upon becoming aware of the U.S. patents in question). According to 35 U.S.C. § 284, when there is a finding of patent infringement, “the court may increase the damages up to three times the amount found or assessed.” Treble damages are traditionally rendered as a result of the defendant’s willful infringement (e.g., the defendant performing one or more actions that the defendant knows constitute patent infringement). Due to the presently ongoing legal battles (both in Japan and in the U.S.), PocketPair has almost assuredly been made aware of Nintendo’s issued U.S. Patents. For example, PocketPair may have received one or more threatening letters from Nintendo indicating that Nintendo believes PocketPair to be infringing Nintendo’s U.S. patents (e.g., along with copies of the U.S. Patents in question). This puts PocketPair on notice and, if PocketPair continues to infringe Nintendo’s patents thereafter (without any other protections in place, such as a non-infringement opinion), should Nintendo ultimately prevail in a U.S. lawsuit, PocketPair could be on the hook for three times the amount for any infringing acts committed after being put on notice.

As a result, it is very plausible that PocketPair maintains its innocence in terms of patent infringement liability, but for at least the three remedy-related reasons above, has decided to remove the features in question anyway. This is speculation, but in addition to mitigating risk for the reasons above, PocketPair may also be changing in-game elements based directly on ongoing negotiations with Nintendo.

What happens from here on out will likely be based on PocketPair’s appetite for a legal battle. Nintendo is arguably in a relatively strong negotiating position at the moment, as it has already filed suit in Japan and has obtained two (likely soon-to-be three) related patents in the U.S. Additionally, PocketPair has had immense success over the last year with Palworld. It may be more of a risk than PocketPair is comfortable with to stake some of that success in a multinational litigation against Nintendo.

Since its outset, this has been an interesting case to follow, with aspects touching on many different areas of intellectual property law. Given the size of the parties involved (and the relative success of their respective games), I think the entire gaming industry is watching to see how it plays out. Regardless of the outcome, this legal battle clearly highlights that patents remain an effective tool in the gaming space, even if their use has recently fallen somewhat out of vogue.

[1] See https://www.patentdocs.org/2024/04/palworld-friend-or-foe.html; https://www.gamesindustry.biz/nintendos-patents-were-designed-to-take-on-palworld; https://www.mbhb.com/intelligence/snippets/what-the-pokemon-companys-patent-applications-are-evolving/.

[2] https://www.pocketpair.jp/news/20250508.

[3] See, e.g., 35 U.S.C. § 284.