all because of a screenshot of birch trees
Worth noting, that image was given as an example of how the game looks similar to Minecraft. It was not the basis of the complaint. Microsoft also claimed the gameplay is stolen as well, according to Valve. So it's definitely not about the trees themselves.
This Reddit post has the actual email from Valve to the dev.
I think this is definitely not a fight Microsoft can win (without a war of attrition I mean), and they seem to agree because they revoked the complaint by now. But there's other blocks not featured on this image that would make a much stronger case imo. Stone bricks and planks look identical imo and definitely can be made unique looking if the dev wanted to.