IMG_1589 Edited

UPDATE: I got plenty of help from www.photolaw.net

Procedural Help Please! (not legal, I'd like to avoid going that route)
A design company took my image without permission and created a graphic for a menu and a backlit outdoor sign for a local supermarket.
They claimed at first that they took the photo, then they said that I didn't register a copyright, and now they say that because they changed 20% of the the original that they can use the image without my permission.

To be fair, I think they took this image when I first joined Flickr and probably didn't have the appropriate settings on my account. But I find that hard to believe because that was over 3 years ago and the menus were designed last December and the sign went up November 1st of 2008.