Alf Temme, a California proprietor whom Microsoft sued last month over his misspelled "Hotmail" Web addresses, such as "ho0tmail.com" and "hot5mail.com," then redirected clumsy-fingered Hotmail users to his company's Web site, fastexercise.com, where he sells exorbitantly expensive exercise machines. Though he freely admits to "typosquatting," as the practice is called, Temme was irked that Microsoft never sent him a cease-and-desist letter, instead making its first move in court. He has maintained that he would have surrendered the Web addresses – and still would – if Microsoft asked nicely. In a federal lawsuit filed last month, Microsoft alleged that Temme and his North Hollywood company, Romfab, infringed its Hotmail and MSN trademarks and violated the Anti-Cybersquatting Consumer Protection Act. Microsoft asked for statutory damages of $100,000 per domain name, for a total of $2.4 million. Last week, however, Temme got a letter from Microsoft law firm Orrick Herrington & Sutcliffe, with a settlement offer of $500,000. "What Microsoft’s in effect trying to do is put a small company of eight employees out of business," Temme told seattlepi "It's extortion! All they could’ve wanted to do was get the domain names."