Why can't Nintendo just sue Sony for imitation?

[Millennium]

You can't just "sue for imitation"; you have to have legal backing of some kind. In this case, patents would be the most likely road to take.

The question is, does Nintendo have the right patents for that, and did Sony actually violate them? I don't think the answer is yes for either one. For example, it's very doubtful that Nintendo has patents on wand-based motion capture: it's been in use in many industries for years.

The other big issue, and the one Nintendo actually might have a patent on, is the actual camera system. The problem is, they're completely different between the Wii and the Arc: Wii uses a mobile camera (Wiimote) and stationary beacons (the ends of the sensor bar), while Sony uses a mobile beacon (the lightbulb on the end of the Arc) and stationary camera (PSEye). Nintendo probably has patents on its own system, but patents are very specific in scope, and the Arc's system is too different to really count as a violation.

Long story short: Nintendo doesn't have a case. I agree that the imitation is obvious, but it's just different enough that a lawsuit wouldn't stand up in court.