I think the key here is not to use names that have already been used and were clearly made up from thin air. Tatooine, for instance. I'm not sure that has roots in anything real-world. Freeport, on the other hand...well, that's not exactly original, and I don't think whomever used it first should feel all that proprietary about it - certainly not enough for a lawsuit.

My own fantasy city is Haibianr, which translates (from Mandarin) into something like "seaside" or "by the sea" - which comes from hai=sea and bian=edge/side. I put the "r" on the end to reflect a regional accent, much like that used by the people of Beijing, to differentiate it from just your run-of-the-mill Haibian/Seaside. Anybody can use Haibian because it's like Freeport or Northside or Lakeville...but the "r" on the end makes anybody using Haibianr rather than Haibian a straight up copy-cat. I might not be able to sue them, and probably wouldn't anyway, but we'll both know it.
M