If you ask me, they should have quit while they were behind. When a Canadian teenager, Mike Rowe, registered MikeRoweSoft.com for his web design company, they offered him a paltry $10 (Canadian!) to give up the name. He told them he wanted $1000, so now they're suing. Come on, Bill, you light your cigars with bills bigger than that.
(UPDATE: Another story in The Register says that he asked for not $1000, but $10,000. Which is a different animal, unfortunately.)
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