The latter is very unlikely to happen. With such a success going for them, I see no way that Nintendo would budge on this and we can probably expect a court battle between the two. Hillcrest released a statement on their website regarding their lawsuit, which cites four U.S. patents, all of which are for a “three-dimensional pointing device”. While even a pencil could fall under the category, they are going after Nintendo for more specific reasons. There is no mention if Hillcrest approached Nintendo when the Wii was in development or launched, or if this is just a sudden decision.
A little over a year and a half ago, Nintendo faced similar trouble with the Wiimote, when a company sued them over a button found on the control.