Honestly, even if they are using someone else's IP, they did all the work on creating the gameplay, story, music (assuming those are all original), and to some degree, the graphics. I can see why Nintendo (or TPC whatever) would not want them to do that, but it's still mostly original work. If they really care about their work, they would replace every infringing graphic with their own graphics in order to make it legal (ie not a derivative work) and then it would be fine to release, sell, or whatever they want.