Looking over the legal document, realistically, their arguments are so damaging from a software perspective that they should lose. IANAL, but from skimming the legal document: The two major notions are that Yuzu violates Nintendo's copyright [1] by allowing people to play unauthorized copies [2]. In order to do so it allows for bypassing Nintendo's encryption (by taking in the keys, it does not embed the keys in the…
> [4] "On information and belief, Yuzu users have (1) dumped Nintendo games they have lawfully purchased and copied the game ROMs into Yuzu; and (2) obtained Nintendo games online from pirate websites and copied those game ROMs into Yuzu. Each such reproduction constitutes a violation of 17 U.S.C. § 501(a) for which Plaintiff is entitled to damages under 17 U.S.C. § 504 and injunctive relief under § 502" How on earth…
More significant is that the Betamax case is from the 80s and precedes the DMCA. The DMCA's anti-circumvention provisions are broad and have been interpreted broadly. The result is that the decryption is a problem all on its own, regardless of things like fair use that were a major factor in Sony's victory.
It's worth noting that Nintendo's first three claims are DMCA section 1201 anti-circumvention claims, with the other claims of personal infringement by the developers and contributory infringement (where the part you quoted is from) being kind of tacked on at the end.