Their approach to you is an overkill and out of place. The arbitration venue for domain names is ICANN, which --- I think --- will rule on your favor. Check ICANN out here: http://www.icann.org

You can only get into legal trouble if you're illegally using a business name or brand name that is already registered with the Securities and Exchange Commission or the Patent and Trademark Office. But URLs, at this time, do not belong to their jurisdiction.