Cloning the core concepts of a game for an App Store title is one (profitable) thing, but stealing a game's name, assets and even code -- and reaping the profits -- is just a tadillegal. Ars Technica has such tales of woe from a couple companies. One example is a small dev called Halfbot that was planning to port its Flash-based game The Blocks Comethto the iPhone. Only, the two-man team soon found out it'd been beaten to the punch by someone who had essentially copied and pasted the game onto the App Store.
The Halfbot team scrambled to rectify the situation and got the app pulled, but only after the title was featured on the "new and noteworthy" section of the App Store, eventually breaking into the top 100 as a $0.99 app. Developer Derek Laufman told Ars, "If we don't make it into the top 100 games when our version is released then we'll know it definitely [affected] our game in a negative way."
The full Ars piece is a solid read to get an idea of how, in this world of small-scale development, with relatively hands-off platforms like the App Store and Android Marketplace, this could become a serious issue -- well, more serious than it already is.