Because the Gameboy logo check and the actual display of the logo happen separately, there were ways to pass the check while still displaying a different logo on the screen. Given that I bought cartridges from major retailers that did this, I'm guessing that Nintendo either didn't know about them, or didn't like their odds in court.

Sega was doing something conceptually similar around the same time, and that did get tested at trial (Sega vs. Acclaim), where the court ruled that Sega could go suck a lemon. So there's some doubt as to whether any of this is enforceable anyway, although Sega kept including a similar system in their hardware up to and including the Dreamcast.

Of course, a company as large as Nintendo could just bankrupt a lot of smaller companies with legal fees via delaying tactics.