I recently purchased the domain name "www.texas-lotto.info" - which
was freely available.  I am now accused of infringing trade marks.  I
received the following e-mail (a great example of Corporate Bullying):
============================================================
Re:     Infringing Use of the Texas Lottery Commission's Trademarks 
        
Dear Mr. Fisher:

We represent the Texas Lottery Commission ("TLC") in intellectual
property matters.  TLC owns extensive common law rights in and to the
LOTTO TEXAS mark (the "Mark") by virtue of its continuous use of LOTTO
TEXAS since at least as early as 1992.  In addition, TLC is the owner
of U.S. Registration Nos. 2,812,137 and 2,708,643 for the trademarks
LOTTO TEXAS and LOTTO TEXAS & Design, respectively.  Information
regarding TLC's registration for such marks is attached as Exhibit 1. 
These trademarks are collectively referred to herein as the "Mark."

We recently discovered that you have registered the domain name
"texas-lotto.info" (the "Domain Name"), which is confusingly similar
to the Mark.  A printout of your registration information is attached
as Exhibit 2.

Your registration and/or actual or potential use of the Domain Name is
an infringement of TLC's trademark rights, and is likely to dilute the
TLC's rights in the Mark, particularly since the TLC is, by operation
of law, the only entity authorized to advertise, offer for sale or
sell lottery related goods or services in the state of Texas.  Texas
Government Code §§ 466.014-015.
 
While your registration and/or actual or potential use of the Domain
Name constitutes an infringement of the trademark and other rights of
TLC, this issue can easily be avoided if you simply agree to: (1) not
use the Domain Name, or any name or mark confusingly similar thereto,
in association with your business or Internet web site, or any printed
or written materials associated therewith, and (2) transfer ownership
of the Domain Name to TLC.

In exchange for your compliance with the above terms, TLC will release
you from any monetary damages that have accrued to date for your
infringing registration and/or actual or potential use of the Domain
Name.  This release is strictly contingent upon your full compliance
with the above terms.  If you choose to not voluntarily comply with
the above, please be advised that we may have to pursue all lawful
remedies available against you.  We trust, however, that such action
will not be necessary.

We would appreciate receipt of your acknowledgment of the above, and
your signature to this letter agreement, no later than ten (10) days
from the above date.  Please contact me should you have any questions
as to the above.
================================================================

MY QUESTION: What are my legal rights here? What should I do?

Can they really stop me using a domain name that was freely available
and that the TLC did not take up? (I have offered to put up whatever
disclaimers they want on the site)

Can they demand I transfer the domain at no cost?  Can I ask $1,000 for it?

Since I have only purchased the domain name but not yet published the
site, am I actually in breach of trademark anyway?

Can they stop me using "texas-lottery" in a FILE NAME on another site?
eg, www.lottery-and-lotto.com/texas-lottery.html?

I have now received this email
=========================================
Terry:
 
I forwarded your message below to my client, and I spoke with in-house
counsel for the Texas Lottery Commission as to your inquiry earlier
this morning.
 
The Texas Lottery Commission does have the "interests of its players
at heart," but it cannot endorse or approve your proposed domain name
or web site usage.
==========================================================

Can I publish these emails on another website? "The Info the Texas
Lottery Commission Didn't Want You to See - And How They Paid TWO
Attorneys to Stop www.texas-lottery.info Ever Seeing the Light of Day"
is a great headline!

I detest Corporate Bullying of this kind, but I don't have funds to
waste fighting "Goliath."

All advice would be welcomed.

Thank you,

Terry
www.lottomasta.com
www.lottery-and-lotto.com