Yes, it is the third party developer's job. It's his job to look at the marketplace for the product he's creating before he spends too much time developing it, and analyze what the current and potential future competition look like. If it's likely you're going to be competing against someone with an insurmountable advantage (the first party), you need to think long and hard about investing resources into that product.
I don't think elegant and innovative is the line here. An idea can be elegant and innovative and something the first party never thought of, but unless it's patentable, you risk first party competition.
Again, I'm not saying first party competition is necessarily death, but it's definitely a challenge.
i'm not saying that a url shortener isn't trivial/obvious, but where exactly is the line that defines trivial and elegant? obvious and innovative?