Was it with their legal right to go after him? Yes. I've never argued that it wasn't. Certainly they could have put their capital to better use by pleasing their customers however.
I know this really isn't your point, but how do you figure their capital could please their customers? As far as I can tell, the only capital involved in this case are their lawyers, which they are being reimbursed for. Has nothing to do with customers, really.
Maybe Iwata got upset that people were pirating his game, and refused to greenlight more projects until the man paid? (kidding)
That I cannot say for sure. I obviously only represent a very small fraction of their customer base. For me though, I'd rather see them put that money into development of games. For as much money as Nintendo is making, they really don't have a lot to show for it. Maybe it's all going into Wii 2.0, or is being put into yet unseen games. In the case of NSMBW in particular, I would have liked to see more thoughtful level design. As fun as the game was, it was ultimately very short due to the straight forward and downright easy approach Nintendo took to level design. The platforming wasn't as well done as SMB3 (my personal favorite) and the exploration wasn't as well done as SMB World.
Speaking of Steam and Nintendo, what if now that every system is online, what are the chances of one of the 3 doing an online authentication for disc copy games. I know that there are ways around something like that , like not taking that system online, but what if one of the big three found a way to authenticate disc and essentially register each game to an account/system. What is the likely hood of something like that being implemented assuming the internet connection wasn't the issue?
I think that would, in many ways, only encourage further piracy. Treating your paying customer like criminals and making them jump through hoops is no way to promote business. DRM for the sake of DRM is a huge turn-off. I think the reason DRM schemes like Steam get by is because it offers a good trade-off for many people. Sure you have to put up with Steam, but in return you get a unified friends list and near-instant access to your entire library from any computer.
Of course, I would argue that things like this aren't really about piracy either. It's about control. Publishers want more and more control so that they can kill their percieved enemies, like the used game market. Furthermore, they can enact a sort of planned obsolescent so as to better "promote" sequels.