A patent is not issued on the full content of the application, rather only on what is claimed. The claims define the boundaries of the invention. This is something I see a lot of people not understand. Just because the claims were found to be un-patentable doesn't mean the USPTO has ruled the entire rubber-banding feature as not novel. I read the claims, they are a bit broad and really only deal with the aesthetic, something you could easily find prior art for. The Examiner made a mistake, he's only human. It happens. But I wouldn't be surprised if the application is refiled, perhaps claiming more of the stuff going on under the hood to make rubber-banding happen the way it does. Depending on how detailed the specification is on that matter depends on if they can claim that, and that may prove patentable on its own.
I have very mixed feelings about refiling of patents post-facto or during a lawsuit. This seems like something that should have been done during development or at product launch to ensure their patent was "up to date." My .02