Hi Thorssoli, sorry to hear you're having troubles...this might cheer you up:
In his original letter he is very wrong. You as an artist hold all the rights to your original work, as soon as you create it.
Have Bungie/Microsoft made your helmet...no you did. You are protected by your own copyright.
The recaster is infringing unless you gave him your permission to reproduce and sell your work.
If this should escalate to court he would need to prove he created it by showing work in progress pics etc.
To protect yourself you can still register your work for copyright (costs money) or for free get your work date stamped. Do this by creating another email account for yourself and send yourself pics of your work in progess.
Also in future it's good practice to take loads of wip pics but keep some for yourself, never put them on the internet for others to grab, date stamp them, include yourself in the pics.
Lets see a recaster try and go back in time to win an argument against that evidence.
I think most of the work round here could fall into the 'Derivative Works' category.
Here's the wiki links for ref:
http://en.wikipedia....Derivative_work
http://en.wikipedia.org/wiki/Copyright
Hope this doesn't put you off producing more work in the future as you're very talented