Generally speaking you can file a trademark for whatever you want; you just have to show it is being actively used in the way you say it is being used.
That doesn’t mean the trademark will hold up under a challenge. But a challenge takes time and money, and a recurring theme in this story (and many like it) is that one party is way bigger and richer than the other. For a small business, it’s generally going to be way cheaper to just change their name than to take on a federal court case against a national company backed by private equity—even if they think they would win.
This is absolutely why we need a "loser pays" civil court system: interested attorneys should be able to volunteer to take on the case on behalf of the small business, with an agreement with their client that they only get paid if they win. Then when they do, they charge the big corporation an absolutely enormous amount of money in legal fees, which the big company is required to pay.
A system like this would keep frivolous lawsuits to a minimum.
I like this idea until I try honestly to defend myself and fail, and the company says "ok we would like our $10k judgement and $10M legal fees paid today please."
So maybe it should be automatic that when a huge company sues a small company and loses, the small company gets all its legal fees paid plus a big payout for their time being wasted.
And maybe it should be different if small companies sue huge ones (e.g., patent trolls), or if small companies sue each other.
As I said, I have personal experience with this - the product we were trying to register had sold with that name in the past, but the PTO rejected our application. We never got to the point where a challenge could be made. We resubmitted a new name that had many more qualifiers added, and that one was accepted.
It's just as well, because Microsoft came out with something shortly after that had the same name. Definitely not someone you want to do battle with.
That doesn’t mean the trademark will hold up under a challenge. But a challenge takes time and money, and a recurring theme in this story (and many like it) is that one party is way bigger and richer than the other. For a small business, it’s generally going to be way cheaper to just change their name than to take on a federal court case against a national company backed by private equity—even if they think they would win.