WRONG! Permission to use a trademarked name can be revoked without warning for no reason. So IF XYZ is trademarked, they can say they are canceling the website owners' permission to use the trademarked name.
This happens all the time. Matter-of-fact, if you have kept up with the news, you can be forced by the courts to give domain names with trademarked names in them to the owner of the trademark. No compensation. So if XYZ really pushes it, your client could be forced to turn over the whole site to them and they would just have to change the sales portion to give them the money.
Can your client tie them up in court for years? Maybe. If client has the money to pay lawyers for years.
Another reason why I tell people to get a lawyer BEFORE entering into these agreements. Every webdesigner, web programmer, website owner etc etc needs to have a law firm who can review things for them. May sound like a sales pitch, but
PrePaid Legal is the way to go if you are in USA or Canada. (except Alaska). Being able to call up a lawyer and get real live legal advice, instead of relying on people on the internet, is the best. They also review contracts for me. All for 1 low monthly rate. I have more than abused them.
I have gotten my money's worth just in the bill collection area. I'm amazed at how many people will suddenly pay up when they get a letter from a law firm.
Okay, enough advertising. Actually I'm dead serious about PPL. I use the service and recommend it to everyone, in business or not.