You are really asking to questions here:
Q1: What are the legal implications if a sole proprietorship fails to comply with the rule requiring registration of his "doing business as" (DBA) identity with the Secretary of State (as in Utah) or the clerk of the county in which his business is located (as in most other states)? For example, does he waive his right in the name?
In Utah, a person using a fictitious business name without having registered it with the Secretary of State is subject to fines, penalties, audits, and misdemeanor charges. So, yes you could "turn him in" and make things difficult. However, if you have not already taken steps to register the name yourself, he would probably be able to rectify his mistake.
If, on the other hand, you were to go ahead and begin using the name yourself, with a view toward stopping him later, you would be relying on common law trademark rights as your theory. You would need to prove that consumers are confused about the existence of two businesses operating under the same name, or that they are likely to be confused because you are offering the same goods/services to the same type of consumers (retail v business) and using the same channels of trade.
Since he has been operating under the name longer this would seem to be tough battle for you to win at first - you would need to build up good will in the name first, which could take time.
Q2: What steps should I take, BEFORE launching my business, if I wish to use a company name?
I always recommend that clients approach the business name selection process in a three pronged way.
First, of course you have to like the name.
Second, you will want a name that is available for domain name registration (or which can form the basis or root of a domain name). Rare is the client who is not planning to use the internet as one of his or her marketing channels to consumers.
Finally, you want a name that won't get you in trouble with anyone having pre-existing ownership rights in the name (i.e., trademark rights). This means doing, at a minimum, a search of your own state as you have done as well as a "knockout search" of the U.S. PTO principal register. The mere fact that someone in Utah may have allowed rights in a business name to lapse does not mean that there is no other company with broader rights by virtue of having used that name in your state.