I don't know the full story here and have not taken the time to dive into it. Perhaps I will later. I just want to make a quick comment based on some of the responses I've seen.
Having been the subject of market research, product plan and intellectual property theft in the past (no, not by the Chinese) and having that information used to launch a competing business I think I have perspective to offer on this.
There is HUGE difference between "R&D" and just "D". "R&D" is slow, costly and full of risk. "D" simply requires execution. Borrowing from sports talk, you know "where the puck is going" and you can aim in that direction. You don't have to invent much and you actually have the luxury of improving upon what you know is and will be the technology of the "R&D" shop from which you stole.
One of the mantras of YC startups goes something like "if you are not embarrassed by your first product...". This is usually true for hardware as well. And, in most instances, you actually know very well what you'd like to build next. However, hardware isn't a simple matter of a weekend pivot. You just don't have that freedom. Not even close. So you have to go with what you have, get it to market, make some money with it and look at introducing your "next generation" product a year later. You can't do hardware spins in a couple of months. The greater the volume the more you are shackled to whatever you are shipping and it can easily be a year or more before you can put out a significantly updated version 2.
I've seen comments about optics being sub-par and more. Well, that's the kind of thing that can happen when you are doing "R&D" and you have to put out a product. It could be embarrassing, but that's what you brought to the party and that's what has to ship.
The thief, on the other hand, knows what you are shipping, what's ugly about it, your future plans, market intelligence and much, much more. Upon gaining this information all they have to do is align it with funding and execute on your version 2 or 3 way before you do. While you are busy building a company the thief can surface out of seemingly nowhere with a product that your first product can't compete with.
This is PRECISELY what happened to me nearly twenty years ago. Our resellers, from the US, Europe, Asia and other areas started to call me out of nowhere to ask if we had licensed our products to company X. One of them made an interesting comment, he said: "Martin, the material they sent me sounds and reads exactly like what we've been talking about for more than a year" (under NDA, of course).
Company X came into the market and put our product --which was going to be replaced in about six months-- to shame. And they did it with MY product plan, MY specification, MY design, MY market intelligence. The net effect was that, ironically, when we came out with our product WE looked like we copied from them. Which was the proverbial addition of "insult to injury".
Anyhow, not defending anyone. I don't know enough. Just wanted to react to some of the comments that point out the thief's product is better than the original. Well, yeah. It would be.