The couple hoped to continue using the name, which they are believed to have spent a huge amount of money trademarking, after they step back from their roles as senior royals next month.
However the Queen put her foot down and said they weren't allowed to use it for their projects and charity work going forward - a decision that hasn't gone down well with the couple.
Meghan reportedly told pals that using the word royal "shouldn't even be an issue in the first place and it's not like they want to be in the business of selling T-shirts and pencils", reports the Daily Mail.
A source told the newspaper: "Meghan said she's done with the drama and has no room in her life for naysayers, and the same goes for Harry."
She reportedly claimed the couple picked the name Sussex Royal to "protect the royal name, not profit off it".
Friends also claim she said their "success is inevitable" regardless of whether they can use the name or not.
The source said: "She said regardless of the name, Harry and Archie have royal blood and no one can take that away. And that as a family, they will always be considered royalty.
"She said they know what their true intentions are and that's all that matters."
Once they've officially stepped back as senior royals, the couple are set to launch their own non-profit organisation, and they will continue to work with their existing patronages.
The pal also told the Mail that Archie is Meghan and Harry's driving force, and they are determined to make a better world for their little boy.
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