Hmm hobbit as a word and a concept is clearly part of Tolkien's personal creation in a way that elves, dwarves and dragons, as preexisting "dictionary words" are not. It is a trademark of the Tolkien Estate according to Wikipedia and that is why halfling is used. However using the word or character names (many of which ar trademarked) is only a problem if you are doing it for commercial purpose - so Sauce is unlikely to get sued for calling his dog Frodo
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Volo - while I think Menel was overreacting it isn't something to be flippant about - people have got into trouble with illegal music downloads and most writers and artists (including Tolkien for much of his life) lead financially precarious lives and deserve to have the fruits of their labour protected. Given that so much of the revenue from the Tolkien estate goes to a huge range of humanitarian and educational charities vie the incredibly effecient Tolkien Trust , I for one do not begrudge it protecting its rights.
