That may not be punishment enough to prevent them from becoming a repeat offender. In an ideal world the result would cost the directors the right to start a business for a long period of time.
I don't see that as too severe in any light - This is pretty close to fraud: trying to undercut market forces by dishonestly claiming rights to the name of a business with 7 years more history.
Their only defence to malicious intent would be ignorance of the author's business existence prior to theirs - which is completely unbelievable considering that's the first and most obvious fact that will be used to settle the issue. Their lawyers would have to claim complete incompetence.
Unless there are more to the story i think the op can just ignore the letter. And step up the SEO so that the other business will have a hard time competing.
There will always be people that try shortcuts to success by committing fraud. And there will always be suckers that will get fooled. The tactic is often to scare - don't fall for it.
I think it would cost a lot of money to invalidate a trademark, especially if the company that owns it has deep pockets and even a UDRP complaint can cost in the range of $5k from what I've read. I think that's why so many mediocre .coms sell in the $2-4k range. It's cheaper to pay the domain/trademark squatters for the guarantee of getting what you want than it is to (maybe) prove their registration was in bad faith.
That’s why I recommend getting domain name protection ahead of time for all your domain names. $10-20 a month can save you from having to pay big legal fees.
