There is no social protocol about baby naming. People and families make up rules such as placing dibs on a name.
It is family courtesy to take into account everyone's wishes but the reality is that families can name babies the same name. Gosh, look at George Foreman who named all of his sons "George" or how we have four Dorothys in our family.
You can't avoid duplicate names, especially with the in-laws. That's how we have three Franks and one Frankie.
I think it is a compliment to have others like your baby's name and give it to their own loved ones. My daughter is dismayed that so many other share her name but I tell her that it is a beloved name. It is far better to share your name with others than have your own particular but hideous name.
Your DH's brother can use the name but grant a very unique middle name to distinguish between your child and his. Besides, I think grandmother would feel doubly blessed if she had two great-grandchildren named after her.
Just to be sure there won't be any family drama come the time you make your announcement, let DH drop a bug in his ear that he thinks it would be great if they BOTH named their children after her. But, neither of you might have a girl so don't make a huge deal out of this.
