In case you don’t know, I’m gonna go over some specifics of my understanding of the situation.
Basically, the Big House was going to use an emulated version of Melee to use Slippi. Nintendo had a problem with the way this was done. Some folks out there think that emulation is the problem, and that Nintendo doesn’t have grounds to do anything. In terms of emulation, this appears to be mostly true.
However, how is the emulator obtained? Folks need to have the ROM of the game, in other words a copy of it in order to use the emulator. You can either have a legal ROM or an illegal ROM. To that point, I submit this image:
I was sent this by a friend. In case you’re wondering what specific manual that comes from, it’s actually Super Smash Bros. Melee. It specifically states you cannot make a copy of the software.
The way I think of it is this. Remember those Bill Nye videos you might have watched in school? Those usually have a copyright warning in which it states that you CANNOT make a copy and distribute it for money. Similarly, if I made copies of a book made by another author, and sold it to people, that is illegal.
I get why folks are upset, because other companies allow for fan interaction in these ways. That said, consider the fact that Nintendo is heading in the direction of Disney with their franchises, likes movies and theme parks. These are high tier IP that are extremely successful (side note, one person suggested Nintendo doesn’t know how to use their IP. LOL.)
I like fan creations and also think Nintendo should leverage fan relationships. However, what is being asked is to let folks do things that BY LAW aren’t allowed. Random people who do not have credentials of any sort, to handle some of the most profitable IP on the planet.
It may make Nintendo look bad, but can you blame them entirely? When you put things into perspective, yes, it sucks, but I find it to be entirely expected.