If the letter wasn't by recorded mail, you can rely on the 10 million items lost by Royal Mail to buy time. Ignore them for as long as you can I'd say. You could sell it to someone else Most of those threatening letters I've seen are by obnoxious young 'professionals', just starting their career. Their job is to give hassle to as many as they can and they'll go after those who bite. Normally they even ask for an amount like £450 right away to cover their admin cost. You'd be a fool to pay that. If you do contact them, don't contact the law firm. Go direct to a high up person in the company. Don't be defensive. You've done nothing wrong. Approach them like any other business associate.
Nice article. The key in that case was a non-revenue producing, non-commercial site. If you place adsense on the site, you're pretty much guaranteed to lose the case. If you try to sell it back to them, they'll hit you with the UDRP rules stating the only reason you registered the name was so you could profit from their trademark (either by selling it to them or making money from their name). My earlier post regarding WIPO was for intelecutal property. The correct orginization that handles domain disputes is UDRP. Have a look at http://www.icann.org/udrp/udrp-policy-24oct99.htm for more info.
Don't ask for any cash. If you do it will be easier for them to say you bought it for that reason. Just tell them you have a website in development.
sorry if you said but how did you recieve the letter? Was it certified mail or just a email? I have alot of experience in ths area and I can tell you to disreguard it unless it came certified mail from an attourney. I have been on both ends of that. I have had to give up probably a dozen names by now or so just because it was alot cheaper then to fight a court battle. One time I even had my assets frozen court ordered by a judge over copyright (that sucked). That was because I listened to people in forums tell me I had nothing to worry about and to tell them to F off. BE VERY CAREFULL. I was stupid and didnt seek the advice of a attourney but listened to people on the intarweb . If you get a ciest and desist (judge ordered or not) sent to your house certified mail then the next step could be something very very serious. If you honestly are not infringing on them or making money off of there name then there is nothing they can do (technically). But do you have money to goto court or to have your assets siezed? Money talks. Once a company has allocated legal resources to get a domain, unless you have a law firm who wants to work for free, it sucks.
Are you in the same industry as them? You can ask them to provide the SIC codes that they ave the trademark registered under. If your are different you could go tell them to take a hike. If you try to sell them the domains you may get in trouble for Cybersquatting. Not sure the laws about that inthe UK.