An updated response to the story from here

MS 'softening' on MikeRoweSoft case

Microsoft has decided to soften its approach in its disagreement with Canadian teenager, Mike Rowe and his www.mikerowesoft.com domain name.

Microsoft spokesman Jim Desler told Reuters last night: "We take our trademark seriously, but in this case a little too seriously."

Desler added that the company is "currently resolving this matter in a way that will be fair to Rowe and satisfy our obligations under trademark law."

This follows Microsoft demanding Rowe relinquish the domain name as it claimed the 17-year old to be "infringing copyright".

The software giant offered Rowe $10 in compensation – the teen Netizen rejected the offer and demanded $10,000 eliciting accusations from the dominant OS manufacturer that he was trying to force a larger settlement.

Reuters adds that the case has generated so much media attention the teenager has had to move his Web site to a larger capacity ISP.

"I never expected this type of feedback. I have put up a defence fund so that I can hire a lawyer to guide me through the process of talking to Microsoft," the boy said.
I suspect a couple of things happened: 1) they realized it made them look like total idiots (instead of just idiots) 2) he was willing to challenge them (not just a roll-over).