I'm not sure that my attitude to "we own all your stuff" clauses is directly relevant to the case at hand, no.
I agree entirely that the employer has the right to ask you not to compete while you're still employed by them. I won't sign non-competes that extend past employment, but I don't think it's unreasonable to sign one during employment. Particularly not for products (FOSS or otherwise) that directly compete with the very thing you're working on now.
Yes, I know, which is why my comment was specifically about clauses in which employers claim ownership of side projects and other out of scope productivity. Please track back up-thread to see the comment I was responding to.
From that I would argue that by building a similar product in his free time he was effectively working for a competitor.