This is based on US law and may be inaccurate elsewhere.
Fanfiction is fiction involving the characters, setting, or other aspects of existing fiction, and written without the original author's permission. Many authors approve of this practice, but quite a few others are strongly opposed to it. Worse, authors may selectively enforce their copyrights as much as they please; if, say, Alice writes something, and Bob and Carol each make some fanfiction of it, Alice has every right to ignore Bob and only sue Carol, perhaps because she likes Bob's writing better or she thinks Carol is a hack. This is the case even if Alice previously said she likes fanfiction and doesn't mind people making it.
For the sake of argument, let's just stick with this Alice/Bob/Carol example. So suppose Alice actually does sue Carol. What happens? Well, it depends. Basically, Alice will need to allege one of the following, depending on the circumstances:
- Unauthorized distribution of the original (if the fanfiction is quite similar to the original)
- Unauthorized preparation of a derivative work of the original (if it is).
Derivative works are works "based upon one or more pre-existing works." The "based upon" language suggests, to me, that a derivative work would not exist but for the original. You'll note that the statute does not say "incorporating" or "equivalent to". In fact, if the supposed derivative is "equivalent" to the pre-existing work, then it's not really a derivative at all; it's basically a copy of the original. Furthermore, Carol's derivative need not include any of Alice's text to be a derivative work.
So what are some of the defenses Carol might raise? Well, here are a few that I thought of:
- Fair use is complicated and will be discussed below
- Estoppel if for instance Alice said something like "everyone should feel free to create and distribute fanfiction of my work." This seems like a long-shot to me; I'm not aware of any examples of this applied to copyright law, but Carol would probably assert it anyway since it can't hurt her. Furthermore, I don't think this would work unless Alice's statement was worded like a real copyright license, as opposed to a general statement of support such as "I think fanfiction is a good thing," or even "I'm flattered when people make fanfiction of my work."
- Innocent infringement, if Alice's publisher somehow forgot to include a copyright notice. This would likely force Carol to take down her fanfiction, but protect her from damages. I don't think any publishers are likely to forget the copyright notice any time soon, so this is largely hypothetical.
- Bare non-infringement, predicated on the idea-expression divide. Carol may admit that she copied certain ideas from Alice's work, but insist that she never copied any protected expressions of those ideas. I have no idea whether this would work, since to the best of my knowledge it's never been tried. On the one hand, this is often associated with attempts to copyright bare facts, as in Feist v. Rural, which Alice is not doing. But on the other hand, Baker v. Selden had little to do with facts and more to do with patentable ideas versus copyrightable expressions. The terms idea and expression don't have terribly clear definitions, in my opinion.
- The purpose and character of the use. Carol would probably win this since she's being creative and (presumably) isn't making money from it. But if Carol's work is too similar in story structure or wording to Alice's work, Carol might well lose this one.
- The nature of the copyrighted work. Alice would likely win this part, since her work is (presumably) fictional and creative rather than factual and academic.
- The amount and substantiality of the portion used in relation to the copyrighted work as a whole. This is very difficult to assess since Carol didn't copy explicit passages from Alice's work. Note that this is explicitly not "just a word count"; the "in relation" language ensures that courts consider the importance of the copied portion, rather than its absolute size.
- The effect of the use upon the potential market for or value of the copyrighted work. This is going to be negligible or positive, so Carol will probably win this one.
Personally, I'd really prefer to see Carol win, and perhaps that's distorted the outcome above. So I'm not going to say who wins, especially since a court might disagree with me about the four outcomes above. But, to be honest, I think that if Carol won parts 1 and 4, she'd probably win the whole case.
Finally, I never got an opportunity to link it, but Wikipedia has a nice article about legal issues with fanfiction, which also includes trademark law (and a few other things besides), which I never got around to discussing. In short, "I do not own" is potentially effective for trademarks, though not for copyright.