Design PRD based on competitor's product :|

ah, yes, the "they did it first but now we can make a ripoff since they released it for people to buy" process!

That's actually not as bad as you think it is. In business that's very often practice. Think about it. How often you choose your solution depending on what other people in your business do? For example on StackOverflow?

@mt3o Yes. I do agree with this, but making copy of entire project with textual content? That sucks.

It depends. When I was making websites, I was doing just that. Then, together with the client we replaced each text with his own, and each picture with one the client owns. It's easier to work this way. Existing product is something that you can touch and play with. Finding new ideas is harder, and keep in mind that your clients aren't very creative, instead they know their competitors.
In the long run, if you stick to this workflow, you will fall behind, because you will always be behind someone, and ultimately you won't expand. Also, there are products which are impossible "just to copy", think of Photoshop. Or Facebook. You can choose something similar, but that's it. It won't be successful unless you find a niche. In the other hand, there is a whole business around copying solutions. Have you been to Pizza Hut or McDonald's? :-) or think of MVNO virtual mobile operators.