Nah, the patent is Switch 2's DLSS implementation, which includes a lightweight variant that gets activated once the game doesn't achieve certain fps, in addition to local or server side upscaling for Nintendo's cloud gaming service.
Alex is wrong when assuming that in the following image "output images at 4K", "images produced by the video game engine" listed here are textures when it isn't the case, because textures are input images not produced by the engine. The output images produced by the engine are instead the rendered frames that DLSS upscales.
What Nintendo is saying in this image is that since with DLSS you upscale engine's 1080p native resolution output frames/images to 4K, they don't need to use as big/detailed textures/models/etc, which reduces the total disc/cartridge size needed.
Meaning, let's say a PC game that has a setting to choose texture sizes, one in Ultra Textures is 4K and other one in Low Textures is 1K.
Let's say for that game the PS5 port uses the Ultra textures and will render in native 4K (or close), and that Switch 2 renders at 1080p and upscales from there to 4K via DLSS so it's ok for Switch 2 to use the Low. So -compression apart- the game file would be smaller in Switch 2 even if it's outputting at 4K (after rescaling via DLSS), because if the native resolution will be 1080p (or 540p/720p/etc) won't make sense to put there 4K textures, which in any case wouldn't fit in Switch 2's memory.
Switch 2 (not including here the cloud gaming variant) just uses DLSS to upscale the engine output from a native resolution to other one. The OP instead means to upscale textures when loaded from the SSD/cartridge, not the engine output.