They don't understand that we never agreed to any of their TOS/policies, they don't understand that we don't use their API. What now? Things will continue normally until they can't anymore. Assume ...
I question whether lawyers are smart enough to understand what API means sometimes... They clearly aren't using YouTube's API so the whole letter is just false accusation. Maybe read the code first before making stupid allegations? No? This is a shitty for profit company? Makes sense in the current landscape I guess, all the shitty for profit services want to drive themselves into the ground for no reason now.
According to the GitHub thread, yes. I think that's how all of the open source apps work - youtube-dl, NewPipe, Invidious at least. Using the API would open them up to legal trouble because you have to agree to the terms to use the API. You don't agree to the terms when scraping.
This c&d wont do much since invidious didnt agree to any terms of service nor do they use youtube's API, that is atleast what the developers of invidious said on github