I'm not a legal expert, but like others, I don't think they have much of a legal argument. But isn't "your business should be based on making innovative products" exactly what Plurk is complaining about?
Although Microsoft was caught lifting code, what if they didn't copy so exactly? Their intention was clearly reimplementing Plurk for China, probably without all the Taiwan users that would make it a sure thing that Plurk is banned. How is that really any better from an ethos perspective?
Plurk is very clearly satisfying some kind of niche in parts of the world that Twitter does not (maybe its the emoticons or easy way for viewing replies in the web interface? or the idea of karma?).
I suppose not innovating is one way of running a business, but it's one I say "boo" to.
