This would make sense if he wasn't using their brand name in the domain name. It's not so much that he's got a competing application as it is that he's piggybacking on their branding by using a domain name that's different from their trademarked name by a single letter in front. I'd say he's pretty clearly in wrong on that point and they're being very cool about the whole situation. Plenty of other companies would start things off with a cease and desist. Instead of paying the lawyers to print a nastygram on firm letterhead they've offered him a little money and tried to make things easy.