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Got the same letter yesterday, im based in the UK and from what i have gleened from this site an others its a question of scare tactics.

After my Wife cryed for about an hour and i looked at the merits of the letter i concluded that it seems rather excessive to drag small businesses into court to enforce the letter of the law.

In my case i simply didnt know that a parody of a the new style beetle and the selling a t-shirt with a battered up bug on it with the comment 'vw nuts do it in scrapyards' would end up costing me $5000!

I have contacted a law firm to ask them to check out the letter and offer advice.  Fingers crossed i will post my findings soon..

Great forum... for those who know nowt about IP law...