Point of order, this is actually trademark law.
I don’t mean to be a pedant about it, this is just the area I work in and I think it’s important for people to realise the difference.
So there’s IP which is the umbrella term.
Then there’s copyright which in most countries is automatic and applies to how works can be reproduced.
Then there’s trademarks which apply to recognisable names/symbols etc (i.e. marks) that things are traded under, and is most powerful when it is registered.
The purpose of copyright at least originally, was in order to protect a creator’s ability to make money off their creation for a reasonably limited period.
The purpose of trademarks is various, but part of it is to prevent any confusion over the authenticity of products, or whether certain things for sale are associated with a particular mark and to protect against bootleg/knock-off versions of something being made.
Presumably Zenimax’s complaint here is that it would perhaps be possible for a reasonable person to mistake Prey for the Gods to be associated with the Prey trademark.
Personally, I think
a) Sure, that’s plausible, so legally they’re not at fault at least.
b) Nevertheless, there is a question of whether there is likely to be damage to the brand as a result of this, whether confusion is likely to be widespread enough to cause damage to the trademark, and that’s where I think they are probably being a little overzealous here.
With trademarks companies tend to be a little overzealous, since failing to protect their trademarks on more borderline cases can sometimes count against them if later there is a more clear-cut violation to defend against, so I get why this happened… but it probably didn’t need to.