hedwards: The issue is trademark infringement, but other than that you're mostly correct.
SirPrimalform: Surely trademark infringement would be use of the trademarked name 'Pokemon'. Using the character designs on posters and things is still copyright infringement isn't it? I'll admit that I'm not sure now, but that's what I had thought.
If I was right, I guess he was doing both.
I remember around the time Pokémon Black and White came out that people were looking for trademarked names and found some. So whilst Nintendo/their subs may not trademark all Pokémon they do for at least a good chunk.
Also my opinion. He is a fool.
Whilst I do think that suing a person over something as small as a "party" is stupid, it should have been cease and desist (I have a feeling he may have ignored that though). The thing is, he did use images, charge for admittance and was not just "renting" a venue.
Maybe he should have thought about just hiking up the food a bit, but nothing named after any Pokémon. People also have to remember that Nintendo and their subs are looking for any means and reason to flex their rather well endowed legal department. They are one of the many Japanese companies who refuse to act like the West, be that a good or a bad thing.
(A little OT)
This is a little similar to when the Olympics came to the UK and everything from local pubs to churches got trading standards at their door to tell them to stop promoting the Olympics. All because it might cause confusion as they were not a paid affiliate of the Olympics. Basically you can pay in tax for the games to take place, but you cannot enjoy a little bit of the fun, while the tax dodging companies can.
http://www.northdevonjournal.co.uk/Olympic-window-display-gets-ll-sue-threat/story-16238118-detail/story.html http://www.dailymail.co.uk/news/article-2151093/Florist-told-sued-Coca-Cola-unless-takes-Olympic-rings-window-display.html