I still don't see what you mean. It sounds like you are saying the real threat would be if they had no other features that could let them stand out in the market, at which point a competitor would be able to beat them by lowering the price, possibly to zero. That can be done by any competitor and has very to do with the license -- my point is that the open source license on that "competing product" actually helps them, by allowing them to make use of the same thing without having to pay that initial investment again. And the first initial investment you made isn't lost as long as you keep a path to retaining those customers.

To put it another way, if the actual problem to the business is that they are falling behind on feature velocity and don't have the head count to keep up, re-using some features from open source code could actually help there.