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How and when exactly is it okay to use a name that someone else might already have in the real world? Or might have already been claimed by another fictional character? I mean obviously, you wouldn't try to pass off "Sherlock Holmes" or "Hercule Poirot" as your own creations, but when is it okay to share a name that, upon further investigation, is shared by someone else? What if it turns out the name you had in mind for a character is shared with some random designer whom you didn't even hear of until you googled this particular name? Or an athlete whose name is barely mentioned on the news at all? Or an actor who only appeared in one movie ever and doesn't even have an IMDB page or a Wikipedia page?

Caveat Lector wrote:How and when exactly is it okay to use a name that someone else might already have in the real world?

Answer: Any time you damned well please.
-- However... If its Sounds realistic, it probably IS realistic. In other words, it's highly likely that the name is in-use by someone somewhere. That's why published works of fiction have a disclaimer at the beginning, usually before the title page:

This is a work of fiction. Names, characters, places and incidents either are products of the author’s imagination or are used fictitiously. Any resemblance to actual events or locales or persons, living or dead, is entirely coincidental.

It's to keep authors and other creators from being sued by people with the same name as a fictional character.

For more info: This Is a Work of Fiction - TV Tropes

Caveat Lector wrote:What if it turns out the name you had in mind for a character is shared with some random designer whom you didn't even hear of until you googled this particular name? Or an athlete whose name is barely mentioned on the news at all? Or an actor who only appeared in one movie ever and doesn't even have an IMDB page or a Wikipedia page?

You're safe. It's not as if you're copying an identity point-for-point. You're just using a name.

I mean, John Smith is a historical figure, but his name is also one of the most common in English-speaking parts of the world.

OokamiKasumi wrote:It's to keep authors and other creators from being sued by people with the same name as a fictional character.

Yes, that's exactly right.

Fun fact: If you live in the US or UK, Sherlock Holmes is public domain.

So actually yes, if you do ever feel like making a Jorge Borge-esque VN where you claim Sherlock Holmes is your own invention and you've never heard of that Arthur Conan Doyle guy, you totally could.*

*(I think. Please don't take me as an authority on international copyright law!)

Thanks to everyone for your advice so far!