It's not a fear, it's a legal obligation. If we don't protect our trademark in instances like this, where we are aware of infringement, we can be legally estopped from protecting our trademark in future cases.
By not canceling doz's trademark you would be prevented from going after a hypothetical Mozz, who attempts to pass themselves off as moz by using similar branding and product offerings?
You and I, and your lawyer, all know that is complete fantasy. Yes, not going after doz may prevent you from going after similar companies who aren't really infringing your mark anyways... but you would still be fully able to litigate against companies trying to confuse your customers.
You should ask them what are the actual risks, and how likely they are to materialize, so that you can make an informed decision. Your lawyers' responsibility isn't to your company's total well-being, but its legal well being. They warn you of legal dangers, but do not consider the cost of protecting you from them -- costs like bad PR. That's why you should tell your lawyers: thank you for warning me, but now I need you to try and help me make a global risk-assessment, one that takes into account all sorts of fallout.
Surely if this is as dangerous as people are insisting, there must be all sorts of instructive example cases. It's not like rational people would get into a fearful panic about something overblown.
I would expand on this further, but I'm already late to my Friday afternoon satanic ritual murder party. It's my turn to bring the Judas Priest tapes.
We may not like current IP laws in the US, but they are the current IP laws in the US.
I agree with your reasoning.