They said they began development before an iOS version of Osmos was announced, but if they were aware of the original game (and it sounds like they may been), a reasonable person would probably have concluded it wiser to choose a new name. Even if they weren't aware, I can't imagine settling on a product name without searching for it. Furthermore, instead of costs to rebrand their work (which would have been questionable enough), they asked for full development costs plus anticipated sales, which would suggest they had no intention of releasing anything.
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