They knew about it when hiring him, then they decided to build a competing product, so they fired him, as if his side project really risks them in any means... sounds fair... the big guys just want things so they take it and we should say thank you, right?
Doesn't matter, a contract was signed. Want that to change, get the laws changed such that these non-compete cannot be in the contract. Even so, it won't matter because the US is mostly "at will" employment and they can fire you for no reason.
Why didn't your friend work on the new product? There is more to this story than you are sharing.
Getting a viral post on HN has a higher power (and likelihood) than changing the laws ;) (we've seen this before...)
But yes, you are technically right.
For your last question, I don't know, I didn't ask, but he's responsive on social media / LinkedIn, feel free to ask. I'm just posting it because it seems when he posted it it got flagged as spam... don't kill the messenger :)