I don't know much about what it's like to hire an independent contractor (i.e. how much oversight and control is typically practiced), but is it really possible that Microsoft wouldn't have noticed how blatant the ripoff was before pushing the site live?
To me, the "independent contractor" excuse is pretty lame, and seems pretty common (the fusiongarage guy's ripped-off article uses the same excuse, just off the top of my head). If you hired them to do a job under your name, then it's your responsibility to make sure that job meets your standards before publishing it under your brand.
This happened to Microsoft recently with their Windows 7 USB/DVD Download tool: http://wudt.codeplex.com/ . They (apparently via a 3rd party development house) used GPL code from the ImageMaster project without releasing any of their sources. MS did the right thing in the end and released the code, but like you say, it shouldn’t happen in the first place. You should hold contractors to the same level of code quality that you’d expect from your employees.
For IP reasons, developers are prohibited from directly using competitive products.
All market comparisons and analysis are done by third parties (at least a separate marketing organization and often paid external consultants) to avoid any chance of taint.
They waited until morning in China ? - at software companies I've worked at they would have woken people up for something as major as this. This isn't the sort of thing where you want to be caught behind the news cycle.
Why wake some developer to check if the code actually looks similar to the competitor. who then would get back to you, then you contact some other people to decide what to do and then you contact the Infrastructure guy to take the site offline.
The outcome: the site would have been taken out a few hours earlier.
I don't think this situation warranted such measures, the PR nightmare had already begun. This way they were able to analyze the situation, contact the guilty vendor and do a preliminary investigation before deciding to take the site offline instead of doint it as a kneejerk reaction.
Those few hours can be critical when you're trying to stay ahead of the news cycle, because you have to race with news deadlines (at newspapers, PR wires, tv stations, etc.)
The difference of a few minutes can be the difference between a minor story of "Microsoft withdraws website over legal issue" and a major story "Scandal: Microsoft rips off competitor; ignores allegations".
Geeks embbeded in a 24-hour web-newscycle often forget that most of the worlds news cycle still revolves around newsroom deadlines.
To me, the "independent contractor" excuse is pretty lame, and seems pretty common (the fusiongarage guy's ripped-off article uses the same excuse, just off the top of my head). If you hired them to do a job under your name, then it's your responsibility to make sure that job meets your standards before publishing it under your brand.