Luther as a given name seems to be extremely rare in Germany. W.Seibicke* lists 9 bearers of the name from the 14th century to 1985 (one in 1940, one in the sixties).
Seibicke says: "
Luther is not recommendable because of the popularity of the reformer." I wouldn't name my son
Luther for the very reason; he would have a hard time at school. There is no law to prohibit the name, though.
I would think that Germans are familiar with
Luther at least as a middle name because of the popularity of
Martin Luther King. I don't think
Luther Vandross or
Luther Burbank are very popular in Germany. However, usually Germans are not surprised at anything weird that comes from accross the pond ;—)
* Historisches Deutsches Vornamenbuch