*IANAL
What W3W seems to be doing is taking down the sites on trademark grounds (that is, "what three words" and "what free words" being too similar).
They might have a case there, and whatfreewords might be better off distancing themselves a bit in naming. Call it "Simple Locator", state somewhere on the website (not the headline) that it's a scheme "compatible to what3words (which is a trademark by ...)" and they lose that angle of attack.
Normally, the "interoperability" defense is used to protect instances of circumventing copyright protection mechanisms, not for copying itself. For instance, that was the defense in the case where Lexmark brought a DMCA claim against a third party ink cartridge manufacturer, claiming that by making their ink work, they circumvented protection mechanisms Lexmark claimed existed to protect their copyrighted firmware code in their ink carts. The court didn't buy it, Lexmark lost, it was established that you can do that kind of circumvention. But this copying of the word list... it's different in a couple fundamental ways, and I don't know if there has been a case that has dealt with this sort of thing.
The main issue is that the "free" team can't counter-claim without losing anonymity, so as far as bogus DMCA claims go, they're quite powerless.
That's why I went for the WIPO dispute, which is based on their trademark and IMHO has the most leg to stand on, instead of relying on the unwillingness of the counterparty (whatfreewords) to defend themselves.
That's what patents are for, but then they'd have to disclose it.
https://github.com/github/dmca/blob/master/2016/2016-07-05-w...
Edit: I forgot about the WIPO part. Yes, the trademark violation claim also seems merited to me.