The company being sued, for defamation, is being sued under the sure-loser theory that, by bringing copyright-infringement suits against the magic shop, the magic shop is being defamed. (It's a defamation case, not an intellectual property case.) As you might imagine, if there were a doctrine whereby merely bringing a lawsuit that made the person or company being sued look bad was coextensive with defamation, then nearly every lawsuit would be effectively nullified by a defamation suit, in retaliation. This plaintiff magic shop is likely to lose, and very early in the case, before it ever really gets started.
Ironically, the case might be so speculative as to be deemed a frivolous or malicious prosecution: The irony being that, only if the copyright suits that are at-issue in the defamation suit were first found to be similarly frivolous or without reasonable foundation could there be a tenable defamation suit -- and even then the defamation action would be on dubious ground.
That said, novel causes of action do occasionally arise, and perhaps there's an inroad somewhere in Washington State law. However, unless the plaintiff's side in the defamation suit is both well financed and represented by a first-rate firm -- not something you typically see when a magic shop is the client -- the case is likely to be a short-lived embarrassment.