Well the competitor's site was banned from China. And what was the last time you visited plurk.com. The UI is not that unique and nobody in MS would have seen Plurk's code to realize it was a rip-off.
When you contract a third party vendor you give them a lot of trust including access to your resources and code. They sign on the dotted line saying they would follow Microsoft's policy for the same which is pretty strict and doesn't even allow the devs to look at 3rd party code.
Whether I, an English speaker in the US, has visited plurk is irrelevant - they are the leader in this market in Asia, apparently.
Whether it was 'unique' or not, the UI delivered was nearly identical to Plurk's and was obviously a copy.
The idea that MS is not responsible because a third party created this is absurd; a company is responsible for what you purchase and release under their own name. Whomever was responsible for commissioning , accepting or supervising this project obviously should have been aware of existing sites. Clearly, someone failed in a supervisory role here.
When you contract a third party vendor you give them a lot of trust including access to your resources and code. They sign on the dotted line saying they would follow Microsoft's policy for the same which is pretty strict and doesn't even allow the devs to look at 3rd party code.