Chameleon, you should read the letter. Nobody's suing anybody. The letter specifically says they prefer to resolve the issue without litigation. It's clearly a form letter designed to show that Prosper is actively trying to protect its trademark (which they have to do in order to keep it trademarked). It's still tacky and uncalled-for, but it's not a lawsuit.
Cal, I read the letter, and it's an un-veiled threat of a lawsuit. With our friend here refusing to take down the site, it's basically a notice of intent to sue.
Sgriff, Chameleon sent Prosper a note referring to a lawsuit, as if one had been filed. Per the letter, no lawsuit has been filed.
Furthermore, as I said above, just because a law firm sends out a form letter, that does not mean a lawsuit is imminent. Law firms routinely send out such letters in an attempt to frighten uninformed people into complying with their clients' requests, even though they know they don't have a legal leg to stand on.
In this particular case, it's important to keep in mind that a company that has a trademark must show that it is actively engaged in protecting its trademark. That's what these kinds of form letters are for. They're not genuine threats to sue, they're just sent so they can be used as evidence that a company has been protecting its trademark so they won't lose it. This is all information that I learned in my Commercial Law class in college; feel free to ask Ira or Xraider about it.