Nintendo forgot (or neglected) to renew the rights to the original nes in a few countries. They can't sue the hardware design beccause technically they no longer own it. As for the games, generally any nintendo games listed aren't actually on the device or are horrible hacks. I guess there's not much for them to sue over, considering how much of their resouces it'd take to takedown an entire company.
If it's anything like the similar systems I've seen, they've got all the marios, zeldas, and metroids on there. As for using resources, how much effort do you think it cost Nintendo when the US customs raided all the modchip sellers?
They'll never go after the people in China producing the things due to it being a little like playing whack-a-mole, but on the domestic side it's just a bunch of individuals and small businesses importing them and selling them in malls and online. It's pretty similar to the modchip business, but even more open.