>Disney doesn't own the rights to Pinocchio. You are free to make your own movie with book version of the the characters and the story.

This is very much an "in principle" thing. In practice, many of these traditional stories have (sadly) become synonymous with the Disney version, so Disney's work is basically the canonical version. This gives Disney a very good sword of Damocles to hang over the heads of anyone else trying to adapt these folk stories: to my understanding if you include a single copyrightable adaptation or embellishment of the original that was written by Disney without "prior art", you're liable to be steamrollered by the lawyer army and be ruined.