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"This suggests that copyright isn't holding back these works..."

IF the copyright holders are kind enough not to harass those fans for infringement. And this kindness is quite commonplace in some contexts (people writing stories about their favorite literary characters rarely get cease-and-desisted), but much less in others ("fanfic" movies about Mickey Mouse are a no-go even for free).

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As an aside, I don’t know that fan fiction is the strongest case for originality!

Maybe not the strongest, but definitely a case. For example, it's my understanding that many scholars believe that The Odyssey is fan fiction by a separate author(s) to that/those of The Iliad.

Fanfic is subject to the Gauss curve like everything else.

The Lord of the Rings is sorta-kinda fanfic to Beowulf, the Witcher is fanfic to Slavic and Celtic mythology. Neither of these two authors started as "big published renowned authors", they were both amateurs smitten by some earlier works.

And yes, I realize again that in those particular examples, the original work was no longer protected. But that is irrelevant to the question of the derived work's quality.

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