That seems like a weak argument, but the courts make all sorts of surprising decisions these days.

In the past, Nintendo tried using their trademark as a watchdog -- the console would reboot if the game did not display it at startup -- then sued unlicensed games for trademark violation. The courts ruled the trademark was purely functional in that use case, and not a trademark, then ruled against Nintendo.

I imagine a similar ruling, if the defense is: The user has a valid key, and a copy of the media. Any circumvention happened before that point in time. We're simply building a compatible device.

Of course, I'm not a lawyer, and the DMCA is a terribly designed law.

Rather than a value judgment of whether or not Nintendo is rightly applying the law, Yuzu settling must be viewed as a fundamental inability for a small group of independent devs to defend themselves against the deep pockets of a famously litigious major global corporation in the modern court system.