The true Muslim is the one who is really keen to treat all people with kindness. When it comes to hurling insults, the treatment should be more and more kind so that the other party knows the manners of Islam and true Muslims. This does not rule out that Muslims can resort to legal channels to regain their usurped rights or restore their dignity.
Dr. Marawan Shahin, Professor of Hadith and its Sciences, Faculty of Usul Ad-Din (Theology), Al-Azhar Univ. states the following:

1. As Muslims, we have our own special way of reacting to abuse hurled against us. We do not respond to abuse with something similar as a way of revenge. Rather, we respond in a gentle way in which we practice true Islamic manners. This is a very special way of treating those who resort to verbal abuse. Stressing this, Allah Almighty says: (The good deed and the evil deed are not alike. Repel the evil deed with one which is better, then lo! he, between whom and thee there was enmity (will become) as though he was a bosom friend. But none is granted it save those who are steadfast, and none is granted it save the owner of great happiness.) (Fussilat 41: 34-35)
Also, while mentioning the characteristics of true believers, Allah Almighty says, (Such as persevere in seeking their Lord’s countenance and are regular in prayer and spend of that which We bestow upon them secretly and openly, and overcome evil with good. Theirs will be the sequel of the (heavenly) Home. .) (Ar-Ra`d 13: 22)
Moreover, we are ordered by the Prophet (peace and blessings be upon him) to follow bad deeds with good ones. The Prophet (peace and blessings be upon him) told Abu Dharr (may Allah be pleased with him), “Fear Allah wherever you are and follow up bad deeds with good ones in order to wipe them out, and deal with everyone with excellent morals.”
Thus, we as Muslims do not turn a blind eye to the abuses hurled against us out of being weak or meek. Rather, we prefer to use high morals when others prefer moral decline.
2. True Muslims are always willing to try their best to clarify whatever form of distortion is practiced against them, and this should be done only with those who are launching attacks due to their ignorance. In this case, the role of Muslims is to clarify the truth before those who are willing to know it, and are really searching for it although they missed the way and were driven to abuse.
3. In all cases and under all circumstances, we should exercise remarkable patience that is mixed with real commitment to this great religion. If we are steadfast in the face of those who attack us, then we will achieve psychological victory and surely the physical victory will soon follow. Most of those who verbally attack Muslims intend to psychologically defeat them and snatch them away from their religious commitment. That is why Muslims should be on their guard against this form of psychological warfare.

Moreover, Dr. Muzammil Siddiqi, former president of the Islamic society of North America, adds: We have to be patient. Never return abuse with abuse and never become violent against those who abuse and falsely accuse us. We should answer firmly and politely and remove the misconceptions from their minds. If you think that taking legal action will help, then by all means do so. One should always use wisdom and the best means possible. Allah says in the Qur’an, (The good deeds and the bad are not equal. Remove the bad with that which is good. Then those between you and them there is enmity will become your friends.)(Fussilat 41: 34)

Finally, the fatwa issued by IOL Shari`ah Researchers adds:

A Muslim, as described by the Prophet (peace and blessings be upon him), is not foul-mouthed. Even when insults are hurled against him, he is supposed to resort to the best course of action. What is the best behavior here? Surely, it is to strive to have a kind relations with the person hurling insults in a bid to make him realize the true manners of Islam. Let us contemplate the following Qur’anic verses, (The good deed and the evil deed are not alike. Repel the evil deed with one which is better, then lo! he, between whom and thee there was enmity (will become) as though he was a bosom friend. But none is granted it save those who are steadfast, and none is granted it save the owner of great happiness.) (Fussilat 41: 34-35)
Thus, the lenient approach is part of the gentle reaction that a Muslim should adopt in this regard.
At the same time, there are other steps that can be taken:
1. Suing the person or the organization hurling the insults against Islam and Muslims. We think that in Western countries there is a large margin of freedom for minorities and this can be best utilized by Muslims to defend themselves and take legal action whenever necessary. Allah Almighty says, (If ye punish, then punish with the like of that wherewith ye were afflicted. But if ye endure patiently, verily it is better for the patient.) (An-Nahl 16: 126)
2. Using different forms of media to defend the rights of Muslims and refute accusations and insults. This can take many forms; writing an article in a local or even an international newspaper or magazine will surely help, inviting the main figures of Muslims in the ‘affected areas’ to give TV shows will also help, and even resorting to individual argumentation is helpful.
3. In all our defense approaches we should not be apologetic. Moreover, we should always consider that the best defense is not always that we launch the best offense. Violence will surely breed more and more violence. With a gentle approach, calm dialogue, fruitful argumentation, the desired results will be achieved.
4. Finally, we should avoid cursing or abusing them or even their ‘gods’. We are clearly prohibited to do that in the Qur’an. Allah Almighty says, (Revile not those unto whom they pray beside Allah lest they wrongfully revile Allah through ignorance. Thus unto every nation have We made their deeds seem fair. Then unto their Lord is their return, and He will tell them what they used to do.) (Al-An`am 6: 108)