They'd have very little chance in a copyright suit and they know it. Because you can't copyright game mechanics or general concepts, and those are the things Palworld pretty obviously copies.
Except for the capture mechanic working similar, which hopefully was not just copy-pasted, the gameplay is completely different. Palworld plays like Arc x Fortnite, while Pokémon plays like Final Fantasy.
And the general design-inspiration itself shouldn’t be an issue. Because I don’t think "style" can be copyrighted
I know that's how it works in the US, but the lawsuit is in Japan, which you always hear about having stricter copyright laws. Not really sure how this one will play out though.