In Australia recently there was an interesting case relating to this issue. The band The Racontuers (with Jack White from the white stripes) went to release a single/album in Australia. There was already a band called The Racontuers (a jazz band that is local that no-one has ever heard of), the original band asked Jack White & co not to use the name in Australia as it was already in use... and Jack White & Co changed their band name to The Sabetours in Australia only. And in this case I think Jack White's band had much more cash to splash. I am not sure if the local band were signed to a label. In a radio interview I heard Jack White say that he just thought it wasn't worth the trouble to fight the ownership of the name, so he just changed it.

The only situation in which i've witnessed this is the band HIM. There's a country band by all accounts somewhere else in the US that are already called HIM and so in some states, the rock band HIM have to change to 'HER'. Silly really. Seeing as HIM stands for His Infernal Majesty lol.

This is a trademark issue more than a copyright issue. However, the legality depends on who used the name first and where. Have you ever heard of a local band getting signed and then being told by the label to change their name? The reason for this is you get territorial protection for a name if you were the first to use it. For example, is you start a local band in Seattle, WA and spend years doing local gigs, and another band does the same in San Diego, CA under the same name, then you both have the right to use the name. The problem comes when one band gets signed and goes national. The band that goes national may gain trademark protection in the rest of the nation, but the other band still has rights in their area. To protect against this a band can register their trademark. This puts the country on notice that the name is being used and can offer nationwide protection. You will note that this is also a problem in business too. A small company may use a name in a local area, but after expanding into other markets they find that they cannot use their name in the other markets. This means that they either have to use a different name in the other markets, or change the name of all of their operations. Both of these are bad for business.