"Hey, really cool project. Though honestly, not sure how I feel about a former intern of mine publishing a project that is so similar to what they worked on as an intern. But on that note, we'd be happy to have you back on the team if you want to continue the project with us :) What do you say?"
or something along those lines. I still wouldn't agree with him, but at least I'd sympathize.
instead he went full-on attack mode, lawyers and all. sheesh. talk about tone deaf.