So.... what we have:
The Tolkien Estate has, over recent months prevented publication of at least a couple of non-fiction books (Books of Jonah & Wheelbarrows at Dawn), the publication of a fantasy series (cf the mention on Boing Boing - which the Estate's lawyers did not dispute), are attempting to ban & pulp an existing novel (self published & which without their intervention would probably have sold a few hundred copies & then vanished without trace, but which through their legal action has resulted in stories being run across the media, including major news sites like the Guardian & the Mail, & has even got a mention on the New York Times site:
http://www.nytimes.com/2011/03/03/fashion/03Crib.html ). To top this catalogue of disasters off the cumulative effect of all this is that a story can be run stating that they have threatened legal action over the selling of a badge that mentions Tolkien's name - & even the Estate's strongest supporters believe that to be true based on the recent actions of the Estate & their lawyers.
I'd say the Estate's reputation is looking pretty poor, & that they've no-one to blame but themselves.
And now, let's ask what harm, exactly, would have resulted from letting Jonah & Wheelbarrows go ahead, & ignoring Mirkwood? None at all. The Estate have been stupid & shot themselves in the foot repeatedly..