If the believed he already was competing in the marketplace, then what would be the point of saying "he should be competing in the marketplace rather than the courtroom." ? I'm genuinely trying to understand what I'm missing here because it seems illogical to tell someone they should do something they are already doing.

What you are missing is the context of this phrase. It is almost exclusively used when talking about two entities are already competitors.

Some of your confusion may come because this phrase is intended neither as a statement of fact, nor a course of suggested action. It is instead a rhetorical flourish intended to imply that one company has a subpar product and is using the legal system to make up for that.