I know the web world is different, but a couple of years back nobody from my product group was allowed to install a competitor product and play with it as it would cause IP prior art issues. Most of the developers did it anyhow, they just would not admit to it. However, I did not know of a single manager who really did it. So I would not be surprised if the managers had an executive policy which did not allow them to see other products. This was at a three lettered big company and not MS though.
Plurk is blocked by the Great Firewall in mainland China, so the guys at MS China have a good excuse insisting they did not know it before, though I would guess they have VPN to get over with the firewall ...
Considering the ripped off site is a chief competitor of this software, I suspect the rip-off was aware at least by mid-level managers.
Well, either they were aware of the rip-off, or they were wildly incompetent to the point where they didn't even know their chief competitor's site.