When you paste-to-upload in VE, the UI takes whatever filename the browser API gives it, which for a paste is usually just "Image".
The upload API then stashes this file, and comes back with a warning that the filename exists. This should still be considered a success because the name at this point has not been finalised, but seemingly it isn't, and accordingly the UI does not let you continue:
| After paste | After "Upload" |
|---|---|
 |  |
Expected
No error is show unless you try to finalise the upload with an invalid filename (i.e. after pressing "Save" on the second panel)
Testing notes
Attempt to add an image to VE by way of copy and paste. After doing so, observe you are asked to name the file and then proceed with the upload flow.
Note: no need to test saving as part of this ticket.