Nintendo doesn't get it, do they? The idea is to provide a better service, not fight the pirates. If they want to get it right, one idea they can try is to release an "all-in-one" console that plays all the previous games, carts, and discs from Nintendo, starting with the NES and ending with the Wii, built to support both NTSC and PAL versions of games. That's:
- NES/Famicom
- Game Boy
- FDS
- SNES/Super Famicom
- BS-X
- N64
- Game Boy Color
- 64DD
- Game Boy Advance
- Gamecube
- Wii
Note that while it might appear to be a lot of slots for these games, most of these can be merged into using the same one (i.e. Game Boy, Game Boy Color, and Game Boy Advance can all use the same slot). A few peripherals should allow easy conversion of a few items, mostly for those who prefer an actual SNES or Gamecube controller over whatever it ships with, or to continue a save on a Gamecube memory card. They can even expand on the controller use/detection by detecting the expansion slot on a N64 controller.
That's the kind of thing that will reduce "problems" like these, not through legal action. Nintendo is only fragmenting a focus, as if Nintendo wins and HYC is shut down, the only result is that it the base will splinter, and it will only be harder to stop these people from continuing.