A good example is MSN vs. AIM in Canada. vs. the USA. I lived very close to the border for a while, and it's pretty amazing how you can drive 20 minutes in either direction, and the market share for the two services would practically trade places.

While that's certainly true, is it possible for someone who is overseeing a contractor to recognize the look and feel of every single competitor?

As an example, do you think it would have seen the light of day if Twitter, not Plurk, was involved?

Whenever something like this happens, it's a sign that the people who could have stopped it were completely unaware of what was happening. I'm sure the final work product was reviewed and approved by one or more people, who likely don't live in holes.

Microsoft knows better than to try something like this deliberately. They're big enough and do enough that something like this was bound to happen eventually. I think they handled it well, and may be more circumspect going forward.