The lawsuit sounds pretty bogus based on what you've said. Surely Google can't be allowed to have exclusive use of "oogle" just because it sounds like part of their company name. That would be like Microsoft saying no one can have a company ending with "soft".

That said, I'd say this would be expensive and time consuming to fight. May not be worth the effort even though you may be in the right (ethically if not legally).

Is there any chance this could get you into the press? Small company being picked on by enormous corporation. Could be good for you.