Now, this is just my own interpretation of what your describing, but it seems to me a dog has the right to be in his own yard off leash. If you were in town, higher chance of foot traffic past the unfenced front yard then your dog should be on a leash. In the scenario you are describing two dogs, trespassed on your property and one of them snapped at your dog when he came to investigate. I'm glad your dog wasn't hurt especially considering his youth but those people and their dogs had no business on your property and from their response it sounds as though they understood that. If this happened on my property or to my dog I would not consider it a co-fault situation and in fact had their dog hurt mine in any way there would have been hell to pay.
Now that's just my take on the thing and maybe not the final and everlasting truth by any means.
Wendi