This is a question that has been bugging me for a long time, the reason is because the only original work I have seen the word "hobbit" used in IS the works of Tolkien. Because of this, I am very curious WHY everybody is replacing the word "hobbit" with "halfling".
"Hobbit" is a trademarked term by the Tolkien Estate. There is "prior art" in that the word didn't come out of nowhere, but Tolkien created a distinct identity for them. Quoting part of that second link:
You can write stories about Hobbits all day long, and publish them, and make money from them, if it’s clear to your readers that you’re not writing about J.R.R. Tolkien’s hobbits. Now, any good editor will tell you that’s no easy task but recent archaeological history has stepped into the muddy fields of IPR warfare and introduced a new wrinkle in time: the discovery of Homo floresienses, the “hobbit”-like extinct species of humans whose remains were discovered on the island of Flores in Indonesia, might serve as fodder for a whole new range of “hobbit” books — although it is well-established that the nickname of “hobbit” was applied solely because of the Tolkien books.
Recent scholarship has also established that J.R.R. Tolkien did not wholly contrive the name “hobbit” himself for diminutive creatures of fairy-tale. Use of the word has been attested in a list of fairy creatures from the 1800s. Assuming you give a wholly new definition to this old word, you could probably publish a “hobbit” story that looks nothing like Tolkien’s hobbit. But you have to understand that few if any publishers would touch such a book simply because the public now mostly associates “hobbit” either with Tolkien or Flores Man. Technically you should be free to do this — practically it may prove to be impossible. Publishers are funny like that. They’ll freeze dead if you use the wrong title for a book (as in “Ahem! No, no! Can’t use ‘Lord of the Spies’ because it sounds too much like ‘Lord of the Flies’ and ‘Lord of the Rings'”).
To use a somewhat parallel situation, the word "superman" has been used as far back as the 1800s, and you can freely refer to a hero as a "superman" or even have him call himself "superman", but if he's confusingly similar to the comic book hero and you use that term, they've got a good legal case against you (we'll ignore that many lawsuits exist without a good case because the lawyers know they can just push hard and most people will fold since there's literally millions of dollars at stake) and frankly, they have to pursue that case because if they don't, they can lose the trademark. (The intellectual property situation of Superman is actually more complicated than that because Action Comics #1 was sold to DC Comics, not written as their employee.)
This has come to the fore when Sarehole-based cafe “The Hungry Hobbit” was served notice by Saul Zaentz company for copyright infringement. I think the cafe is still trading because the word ‘hobbit’ is the only thing that’s Tolkien about this humble business, though in my opinion it’s the sort of place a hobbit would eat, if they had been around.