According to the definition from the Open Source Initiative, "open source" also requires free redistribution. See the first point (emphasis mine).
- Free Redistribution
The license shall not restrict any party from selling or giving away the software as a component of an aggregate software distribution containing programs from several different sources. The license shall not require a royalty or other fee for such sale.
It also requires freedom to distribute modifications:
- Derived Works
The license must allow modifications and derived works, and must allow them to be distributed under the same terms as the license of the original software.
CC-BY-NC-ND is not "open source" (both due to the NC and the ND), it's more of a "source available" type of license (when applied to source code). The difference between "free software" and "open source" is more ideological than anything else, they both define the same freedoms, just with different ideological objectives / goals.
There are many games that had that mechanic before Arceus.
In particular, Craftopia (which is from the same developers of Palworld) had capsule devices that you can throw to enemies in a "virtual space" while characters "engage in combat" before Arceus was a thing.
Just because they wrote a patent does not make it enforceable... patents don't really mean anything until they are actually tested in court so they are just tools to try and scare people away whenever a company wants to bully with the prospect of a lawsuit.
I feel that Palworld is likely to win this, this actually is an idiotic move from Nintendo and a win for Palworld.. now they will get more publicity, perhaps another spike in sales, and they are finally given the opportunity to prove how they are in the right, so they can shut up all the naysayers who complained about it. I'm hoping all the paranoic empty claims about "blatant asset theft" will be settled once and for all.