Ultimately both parties end up losing, that's just life. It's more of a territorial issue than anything else, one party thinks they 'own' something and therefore have to defend it. In the past, that thing was typically land, but today it can be just about anything.
If you look at the pro-line page now pro-line claims to have officially licensed the VW bug body
http://www.prolineracing.com/p-658-vw-baja.aspx
Sometimes what happens is one company gets an 'exclusive license' (in this case, an exclusive license for RC bodies) and this may oblidge the licensor to threaten anyone else using the body.
It's happened before in the hobby with look-alike aircraft like the 747 models and Boeing, etc. In some countries (ie. US but not Japan), trademark law also obliges the bearer to go after any unauthorized user or risk the trademark falling into the public domain. But whether a body shape for RC cars relates to trademark for real cars is a very debatable thing, Losi might have just backed off for not wanting to litigate as that can be very expensive.