Bottom line is someone out there is a bit dishonest and Scott got hosed. The best recourse is to keep your name and product out there so people can find it. The other best recourse is to make yours the best quality, value and solution for the money. That's the hard part for small operators.
I agree with your ideas for Scott's best recourses.
OTOH unless someone else is making a false claim of being the original or using the BadBird name, I don't it's being dishonest by making another version of a product that's clearly not patentable and doesn't have any trade dress to trademark. It's just something that happens.
I have thought about making a product that I think would fill a niche. It's not a protectable idea, just something that I think there's a small market for. I know that if I do it and it sells, somebody will jump in and make something similar, and probably for much less in China. It's just the way of the world. You emphasize your strong points and hope enough people will buy from you.
Most products you own have parts or components in them that were first thought of by someone other than who makes it now. Every TV set, every refrigerator, etc.