I [xxx app developer] received an email from Apple that a developer [of yyy app] believes I am "infringing their copyright."

Description of Issue: [xxx developer] copied my application (my application is [yyy]) feature by feature. Even their donation model is completely copied from my application. Their first release was significantly later than mine, which implies copying of the application rather than parallel development. I suffered significant financial losses because of their actions, in additional to promotion problems as many people are confused with their product. My advertising was based around the idea of a "free [yyy] application for an iPhone" and they have just taken that as a title for their application. I would appreciate if someone takes a look at their release schedule and compare it to my releases. Additionally, please take a look at their functionality and how it point by point copies the functionality of my older releases. I am asking Apple to remove their application from the App Store, and ban them from resubmitting it. Thank you for your time! [yyy developer], the developer of the [yyy] application.

My response was:

1. The code of [xxx] is written by myself, using Apple public API.
2. The graphics elements are designed by myself.
3. The user interface and app control are independently designed and different from other [similar type] apps (please judge yourself).
4. In-app Purchase is iOS Apple standard API.
5. iAd is Apple iOS standard API.
6. I don't think features can be owned exclusively. In fact, my app comes with fewer features, as I prefer minimalist design.
7. I don't think idea can be owned exclusively.

Apple responded:

Thank you for your response. Unfortunately, Apple cannot serve as arbiter for disputes among third parties. Please contact [yyy developer] directly regarding your actions. You can reach [yyy developer] through: [...]. We look forward to confirmation from both parties that this issue has been resolved. If this issue is not resolved shortly, Apple may be forced to pull your application(s) from the App Store.

Then I sent my response above to [yyy developer].

[yyy developer] then asked me "to provide (my) legal address and contact details that (his) lawyer requires to file a copyright infringement suit."

IMO, I don't think the [yyy developer]'s claim on "feature by feature" copy is valid. I have fewer features, completely different user interface design. However, I don't think I can afford a legal action for an app of so little financial return.

So what's your advise on this? Should I just let Apple pull my app? Or is there any alternative I can consider?

FYI ... UI of [xxx app]:

and UI of [yyy app]: