yes, that's pretty much the state of things in the US. Anyone can file a lawsuit for any reason; granted if someone files for something stupid it will almost certainly be laughed out of court immediately, but you will still have to spend time and money defending yourself from it.
And this is in no way limited to companies. You can be sued for asking the guy behind you in line to talk into his cellphone quieter. That'll almost certainly be dismissed with prejudice, but you'll still need to either research the law yourself or contact a lawyer to deal with that idiot.
In a situation like this, people should be publicly shaming PeopleBrowser (people publicly shamed Twitter for going back on their API!), and I'm happy that the tone of the TechCrunch article at least portrayed PeopleBrowser in a negative light.
Where the legal system fails, social pressure is the next best option.
"What we didn't know about <him> was that he was a retired lawyer, and which is one of the dangerous breeds of lawyer because they have nothing but time to crawl right up your ass" -Stephen Colbert [1]
[1]: http://www.youtube.com/watch?feature=player_detailpage&v...
I agree that Twitter backtracked on their API and platform, but a bogus lawsuit is the exact opposite of the right way to fight back. Even though App.net and others have their flaws, that is the "right" way: developers have to steal people's attention away from Twitter instead of going for a lawsuit that doesn't make sense.