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The Pokemon Company releases a statement regarding Palworld: Inquiries Regarding Other Companies’ Games
(corporate.pokemon.co.jp)
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Is nobody aware of Cassette Beasts? This isn't the first Pokémon clone that has been made. As long as you don't use Nintendo's IP, they can't go after you.
The idea of a Pokémon clone isn't protectable, but existing Pokémon are.
You can make a Pokémon clone with entirely novel monsters, but if a judge thinks they look too much like an existing Pokémon they're gonna have a problem.
That's really the issue. The creatures in the game, as I've seen pointed out in various places, are much closer in design to actual pokemon designs than in other poke-clone games, with some looking so close they might as well just be a regional form. I don't even know any of the pals' names but I can somewhat clearly recall seeing one that's basically "Luxray at home". I know the maker of the game has said he doesn't really value originality, but there's a difference between being unoriginal and straight-up plagiarism.
I see it. "Electabuzz at home" wielding a mini-gun is all over the marketing I've seen.