Lol. Not too surprising.
Lets talk legally. The thing is that the developer who used the words before doesn't matter. They never gained anywhere near that recognition nor did they use any unique creative words.
Candy crush has a right to protect it's brand. It's theres and people who use similar names may be commiting a tort called passing off which is basically getting sales by piggy backing on someone else's brand.
The only issue with this is that they're trying to protect common, bland, non-descriptive words. Protecting the string of words "candy crush", that's no problem. But this.....
Only in disney land is something so absurd possible.... I assume the "reserve" refers to trademarks. No legit registrar would ever in a million years give a trademark over single words that exist in a dictionary.
The issue is that they've built enormous reputation using very bland words, making passing-off reasonably arguable. In light of this, I think it's quite easy to make such legal threats because they've got the money and the massive reputation (if everyone knows you, its easier to establish someone else is trying to take advantage of your brand) and these little developers have no hope in defending the legal challenge.
So they do have something to protect and which the law allows them to protect, but yeah they're being assholes, and their attempts to protect those words ought to fail miserably.