"Urban Homesteading" trademark -- legit mark or trademark bullying?

TechDirt ran a piece this week about alleged "trademark bullying" by a family who registered "urban homesteading" as a federal trademark.

The story raises an interesting question -- how should the USPTO handle phrases that are in common usage, even if they aren't registered?  I once attended a talk by a trademark examining attorney, and she described the process that they used to allow or reject trademark applications.  I remember that she was very emphatic about the scope of their examination, that they only compared the application to their trademark registers and not to state trademark registers or common law trademark sources such as directories and product catalogs.

Anyhow, the point of that digression is to speculate that perhaps the dispute here -- that "urban homesteading" is indeed a common term and should not be allowed as a trademark -- is probably a prelude to a court case that will eventually make the final determination.  Just speculating; it will be interesting to see what happens.