I have to think Blizzard loses here because of lack of use in commerce.
Basically, if unregistered you get a limited trademark for the areas you use in commerce.
Where is the commerce here?
Maybe they can argue since it is tied to Warcraft III, which was commercial. Did they ever monetize or distribute DOTA? Did Riot Games do so?
What area is the mark used in?
This question is problematic because of the internet aspect of the case, which laws generally aren't prepped to deal with. The "zones" are usually defined geographically.
Valve is first to register, has some actual use in commerce (or intent to use in commerce). Even if it is only to sell hats.
Blizzard can only win if they establish the use of the mark in commerce, and that creating a stand alone game was in the "zone of likely expansion" for the unregistered mark.
I would need to do more reading, know more of the facts, and do a closer review of my trademark law to speak with anything approaching a degree of certainty, however.
edit: Also, DOTA is all they registered, as opposed to "Defense of the Ancients"
In skimming, it basically looks like Blizzard is doing exactly what I said, going for a VERY broad definition of Commerce. Which might work if they were talking about the Commerce Clause, but I'm not sure the PTO will apply such a broad definition.