If you want a name and somebody else already has it, just pick something else. The person who has actually played that character with that name gets precedence over anyone else making a new character because the new player has no association with that name regardless of whether they like it or not.

That's just as true when the existing character is level 1 as it is if they're 60. As soon as somebody has played a character in the shared game world (i.e. they've passed the first level 1 intro quest), they can be known by their name and that name should from then on represent that character and nobody else's unless the owner of that character decides for themselves they want to delete or rename it.

Not everybody who plays a character levels it. You can roleplay at level 1. There's absolutely no justification for regarding low level characters as any less important than endgame level characters are. Both can be important to the people who play them, and neither should have their names taken away just because somebody else can't think up a name of their own.