"Art is not a thing, it is a way."--Elbert Hubbard
When I was in undergraduate school (a long time ago), I read Wide Sargasso Sea and Rosencrantz and Guildenstern Are Dead. Wide Sargasso Sea, by Jean Rhys, takes the story of the mad wife from Jane Eyre and retells it. Similarly, in Rosencrantz and Guildenstern Are Dead, by Tom Stoppard, the author told the story of these small players in Hamlet. When I read these stories, I enjoyed them and found them to be an interesting homage to the works from which they borrowed their lead characters and a critique of those very same works. At the time, I did not think about the potential copyright consequences that these new works created.
Now, there are fan fiction websites all over the internet where professional and non-professional writers can take characters from another author and put them in different situations. One site, FanFiction.net, has over 2 million pieces of fan fiction. Some of the pieces are short-short stories, others are full length novels. These stories are not created for profit (as opposed to Wide Sargasso Sea and Rosencrantz and Guildenstern Are Dead which were both published and sold).
While fan fiction may be a "derivative work" which is a right given to the author of the original work pursuant to the Copyright Act, some authors view fan fiction as a blessing and a way to market its work. I must admit myself that after reading the books mentioned above, I reread the original works. Others authors, however, aggressively try to shut down fan fiction in an effort to maintain the sanctity of their copyright rights.
It is easy to see both sides of the issue and why some authors may eschew their right to stop the proliferation of fan fiction using the characters they created in favor of free advertising for their works. On the other hand, those who hold fast to their intellectual property rights are well within those rights to enforce them against the authors of fan fiction.
My livelihood revolves around helping others obtain, maintain, and protect their intellectual property rights. Yet, I think that blindly asserting one's rights "because s/he/it can," may do more harm than good. I often counsel my clients to conduct a cost-benefit analysis when they wish to target another whom they feel is violating their copyrights. Oftentimes, the clients (with my assistance) that there are other alternatives that reside between all out copyright protection war and doing nothing.