Parody is a defense you can raise, but it's tricky to win. [1] And even if you do win, you've got to pay your lawyers who made the arguments for you.
If I were arguing for W3W, I would point out that in some dialects of British English (where W3W is based), "what three words" and "what free words" would be pronounced identically. This means that in verbal communication, it would be very difficult to tell the two apart. That would make it harder to win a parody case, since in spoken language people wouldn't even be able to tell that you were saying something different.
If you only used profanity, celebrity names, only had locations in North Korea, or something absurd, I'd agree. If you're marketing an equivalent product, nope.
Neither satire nor parody are fully immunized under US trademark law, and it doesn’t seem obviously outside the scope of what could be problematic from either an infringement or dilution liability standpoint notwithstanding parody.
I am not sure that is the case. You definitely have an argument if this was only done in satire but when you are also truly offering a competing product while using a similar name it is hard to argue that it is just parody.
There was a comedian who successfully opened a coffee shop in the US named "Dumb Starbucks", logo and all. Every menu item was copied verbatim from the actual Starbucks menu but with the word "Dumb" added as a prefix.
Despite a massive social media campaign that would have certainly caught the eye of Starbucks, they received no legal threats.
If I were arguing for W3W, I would point out that in some dialects of British English (where W3W is based), "what three words" and "what free words" would be pronounced identically. This means that in verbal communication, it would be very difficult to tell the two apart. That would make it harder to win a parody case, since in spoken language people wouldn't even be able to tell that you were saying something different.
1: https://www.lottfischer.com/blog/trademark-parody/