Well, I'm not an IP lawyer, but I am a lawyer, at least. At least in the US, material subject to copyright does not have to be used to be protected, and the terms of protection are indeed long, thanks, primarily, to the untiring efforts of Disney and heirs of George Gershwin. Abandonment is no defense to a copyright violation, as it can be in a trademark situation, and Nintendo is free to go after (or not go after) anyone infringing its CR as it sees fit, at any time. It may seem unfair, but, if the current owners of the IP of long-bankrupt company like, say, Cinematronics wanted to go after a BYOAC'er who had "Armor Attack" on his PC, the BYOAC'er would lose. Lets all be thankful that none of the biggies has really pursued this as with the MP3 deal.
Copyright protects original works and trademarks denote the source of something. I am certain that Nintendo has secured CRs and TMs to the fullest extent that it possibly could on Donkey Kong, Mario, etc. Perhaps they have not gone after Jeff because he's relatively small potatoes, he's not damaging the image of the characters, doing so would piss off a lot of gamers who buy Nintendo products, it's not worth the legal fees, bad publicity, or some other reason. I suspect it would be a different story if he represented DKII as a Nintendo (or Nintendo-approved) product.
I agree that Chinese pirates couldn't give a flying -smurf- about some C/D from Nintendo or anyone else, and I doubt the government cares too much either. That's why Nintendo had to start putting in security chips instead of just taking them to court. Only when China starts generating enough of its own IP will its attitude start to change.