Palworld isn't even that Pokemon-like, aside from some of the Pal's models, and type strengths/weaknesses. But that's basically where the similarities end. Palworld is an open world survival/crafting/base building game. Even the whole collecting monsters thing feeds directly into the base building aspect.

Maybe it's the Communist in me, but I don't get why some people are so eager for Nintendo to file a lawsuit. Nevermind whether it actually infringes anything, it isn't eating away at Pokemon's sales or anything. It plays very different, a little closer to Arceus than any traditional Pokemon game. I see it as a win. Maybe it will encourage Nintendo to take Pokemon in a more open world direction with more features.

They could develop different features to succeed in separate environments, over time filling different niches, until eventually they are unrecognisable as coming from the same source.