At the time Atari had launched the original 400/800 (1978/79), all Commodore had to offer was the Pet series, which like the Apple 8-bit and similar products, were based on a previous age of computer technology compared to what Atari was offering. In fact, Commodore had nothing to "out-technology" Atari with.
One of the directors/principles behind one of the better-known Atari related websites had, during the Tramiel years, a contact at Commodore named Bob Yannes, who provided much information regarding Commodore's business and technological tactics. According to Bob Yannes, one of the main hardware engineers on the VIC-20/C=64 hardware design team, the directive given to him by Commodore's management at the time was to 'out technology' Atari. The only way they could do that was to find out how Atari designed its graphics/sound chip set. Getting the engineers responsible was out of the question as most of them had jumped ship at Atari and joined Jay Miner and Dave Morse at Hi-Toro (soon to become Amiga and become the first non-Atari company to be funded and financed by Atari) and similar hardware or software companies (Activision and Imagic being two of the better known ones) or were tied into long term contracts in one of many disparate Atari R&D companies (apparently Atari even forced engineers to sign Non-Disclosure Agreements.)
The only way that Commodore could compete with Atari hardware was to come out with a very similar product with similar technologies. And the only way they could do that "legally" and without patent infringements was to "reverse engineer" or clone Atari's hardware (or to use the Yannes' quote, "tear into.")
Instead of using Atari names for the various hardware tricks like PMG's (MOB's) or Playfields (Bit map modes), Display Lists & DLI's (Horizontal kernels etc.), they essentially came out with their own. Their first attempt was the VIC-20 hardware it borrowed from both the Atari 8-bit hardware (pre GTIA) and also the VCS chip design, in that, like the VCS, the VIC-20's sound and graphics hardware was hardwired into a single chip like the VCS TIA. Unlike the VCS TIA Chip, the VIC-20 sound/graphic hardware technology was borrowed from the Atari 8-bit. The C=64 hardware carried on in very much the same vein except that the Commodore 64 went away from combined sound/graphics hardware like the VIC-20/VCS TIA design and instead followed the Atari 8-bit mantra of separate sound/graphics chip hardware, albeit with slight improvements (as far as sound hardware was concerned.)
Essentially the VIC-20 was basically Commodore's VCS with a keyboard (as it borrowed more from the VCS and less from the 8-bit), and the C=64 was Commodore's Atari 800 (as the C=64 borrowed more from the Atari 8-bit then the VCS.)
To stay in the computer race, Commodore reverse-engineered Atari hardware and rebuilt it and improved it as the Commodore VIC-20 and the Commodore 64. No doubt, there were improvements made by Commodore on the Atari hardware, but the basic design itself is an Atari design. So the next time you pop open your Commodore Vic-20 or Commodore 64, take a look at reverse engineering at its best. This was one way the Jack Tramiel could cut down on Research and Development costs and bring computers to the masses and not to the classes.