Its definitely something to consider otherwise who knowsm maybe down the line someone who owns a better TLD like .com can be like "Pay me $XXX,XXX or I will put bad content on the domain"
The guy that 'extorted' us dropped out of law school and knew exactly what he could and couldn't say.
So the answer to that is probably that it's not extortion if you know your way around the law and are clever about it. He never extorted us, he just offered to sell us the domain name that was shit talking our company. Of course he's allowed to SEO the domain name with a link farm, that's not illegal. And it's not slander if it's true or not presented as a fact, just as speculation.
You don't really want to become known as an easy extortion target.
I just checked his blog/authority site and he does exactly the same thing to others now. Apparently he won a court case where he did this to a government agency and his current target seems to be a cleaning company that took his parking spot once.