I Received Cease and Desist???

I would not ignore the email completely. Instead, you reply to that email stating that you disagree with their findings and that you are willing to have open lines of communication to resolve the issue, but that you simply cutting your losses is out of the question.

Buying domain from you is cheaper than suing you. Lawyer wants to sue you, then he gets to milk them. For sheer fun of it, if I was in this position, I would let them start the proceedings, then initiate pow wow with actual company representative, not some ambulance chaser style lawyer sending these emails, and ask them if they want this to go all over blogosphere or make some sort of a deal where I am compensated for my time, and buy domain from me. It is in their best interest to make a deal and keep things quiet. David vs Goliath stories in the news never work out well as publicity for Goliath.

Things are bit different if they could prove you intentionally chose to infringe on their trademark, misrepresented your website, phished, or whatever. Without knowing you or your website that's best I can offer as advice.

 

Some people considered this domain-trademark dispute a David vs. Goliath thing:

http://www.internetlibrary.com/cases/lib_case523.cfm

The so-called Goliath there legally won, and everyone eventually moved along. One can disagree with that decision all s/he wants, but the court in that dispute found that the complainant demonstrated their case. (thanks in part to the respondent's disclosures...)

In this thread, the OP registered a domain name bearing a unique and famous trademark. The more unique and famous the mark, the stronger their enforcement against a domain name that commercially exploits it.

So far he's okay, especially with Tumblr's retraction. He'll likely get into trouble, though, if he used that domain name to make money off of its trademark namesake.

Of course, only time will tell.

 

Lawyers actually do use emails to email owners of websites and etc. It is a practice that is done a good bit now a days.