I seem to remember it being stocked on the shelves of US anchor stores like K-mart and Venture for two years; perhaps others have more accurate information. It definitely was a hot game for it's first year of release--lots of shelf space and TV advetising that I don't remember. I also don't remember HQ being present in those few hobby stores that I frequented.
As to why it didn't stay, you have to consider it was marketed towards 10 years old and up. That market is very fickle. Damn few games stay on the shelves more than a couple of years because of that, and those traditional cash cows that do stay are largely there because they are so strongly supported by the toy companies that make them. Milton Bradley (now part of Hasbro) saw sales decline as the next batch of kids moved on with the cult of the new. The suits decided that HQ didn't have legs and set shelf space for The Next Big Thing.
I feel things might have been stretched out a couple more years with better expansions. The first two expansions, KK and RotWL, worked well enough, and they didn't even require new production molds. The next two
in North America, the Barbarian and Elf Quest Packs, [-edit] were largely failures due to poor support. They apparently weren't playtested, and availability was next to nil. I remember waiting in vain for them to hit the shelves.

In retrospect, I should have mail ordered them with the flier info that came with KK or RotWL. Hindsight and all that.
I don't believe legal problems with GW was the issue. The break was pretty clean.
Maybe Axis and Allies remained in production because of its market of 12 years old and up. That success may be attributed to a more mature group of buyers that weren't so swayed by fad advertising. Maybe they shopped at hobby stores as well, deepening the market and profits for MB. I don't really know, just speculating.