Fanfic has a long and distinguished history, beginning decades ago with the emergence of Star Trek as a cultural phenomenon and new mythology for our time. At that time, fanfic writers put together fanzines that were xeroxed and passed by hand to a few dozen or a few hundred pairs of eyes. With the rise of the Internet and the World Wide Web, however, fanfic could be distributed to tens or hundreds of thousands of willing readers everywhere. This has caused some problems relating to copyright and trademark.
One could argue that some of the ethics of fanfic are actually much older. For example, Shakespeare based his plays on history and other events, back before the legal fiction of copyright changed things. Maurice Leblanc's Arsene Lupin stories often featured cameos by a thinly-disguised Sherlock Holmes. One of the worst things you can ever ask a fanfiction writer is "Why don't you write something original?"
However, some is quite good. Having only read anime fanfiction, I can't speak for other canons, but presumably they have their gems as well. If you ever want to read some fanfiction, I recommend that you trouble some friend of yours whose literary tastes are similar to your own to see if they've read any fanfic they liked. I can't count the number of times I've asked some fellow fan about fanfiction, and he/she reacts with disgust, because the only fanfic they've read is a Star Trek/Bablyon 5 crossover where Sheridan buggers Kirk up the back door.
That being said, give fanfiction a chance. You could always write your own.
Regarding legality: it's probably technically illegal, but as long as you don't try to sell it, most authors and copyright owners don't bother to pursue legal action. A few have, but they are assholes.
As an aside, if I were the owner of a profitable canon (Harry Potter, or Star Wars, or the X-Files, or Star Trek, or whatever) would attempt to create an official fanfic license, such that I would grant fanfic authors permission to write original stories using my characters and universe, in exchange for the exclusive right to pull the story from the net and publish it in a "best of fan fiction" anthology if I liked it. The author would receive no money, but would get valuable exposure, while I would be able to sell a new story for no effort and no expense. There are details to consider, but it seems like a good idea to promote the series while endearing one's fan base, which is never a bad thing.
There is a cure though. If you ever have the desire to write Fan Fic, their is a simple sure-fire way of solving this.
Step 1: Turn off the Computer
Step 2: Get yourself a life!
and finally
Step 3: Get yourself the hell outside!
All published fanfiction must include a disclaimer stating that the author does not own the canon characters featured in the story and that they are not profiting from the story in any way.
Within the world of fanfiction there are many different types of stories.
Gen fiction, which usually sticks to the canon established by the movie or show being featured in the story.
Crossovers which combine two different movies or shows.
Original Male Characters or Original Female Characters can be featured in a story. These characters are the creation of the author and not part of the movie or show canon.
Mary Sues feature the author himself or herself in the story.
Hurt/comfort stories have one character get hurt and another character must comfort him/her.
Smarm stories feature non-sexual affection between two characters.
Adult stories which feature various levels of erotic involvement between a male and a female character.
Slash stories which involve a homosexual relationship (not necessarily with sexual content) between two canon charcters.
I have publish a trilogy of stories online. They are archived at the Magnificent Seven FanFiction Archive found at http://www.cairdean.com/magnific/index.html. The titles are Time in a Bottle, Uninvited, and In My Life.
When asked by About.com what Buffy the Vampire Slayer fans should do now that the show is over, Joss Whedon, creator, replied, "write fan fiction."
Joss understands. He gets the fans. He knows that imitation is the sincerest form of flattery, that fan fiction can only benefit the creator. It keeps people interested. It keeps them thinking. If what you have created has sparked the imaginations of so many minds, then you must be doing something right. Why fuck with a good thing? Why would you complain about the fact that people are so enthralled by the world you have created, and its characters that they just can't get enough? 22 episodes a year just doesn't satisfy the cravings. So they get their fix elswhere.
Okay, so there is a lot of crap out there. PWOP (porn without plot), fluff, tripe stuff that gets read by those obsessive types who follow Charisma Carpenter to every bloody con in the Western Hemisphere. But every niche has its crazies. And they are harmless- well creatively speaking anyway.
There is also good fan fiction. This is the stuff that actually captures the essence of a show (or Movie or Book series) and brings it to life on the page. It's not about making the characters act out your stupid little fantasies. Good fanfic writers will keep their characters in line. You won't see Wesley Crusher rolling doobies for his classmates, or Doctor Who pinching some hot yellow alien chick's ass. A good fanfic writer will write dialogue that you can actualy imagine the characters saying. And if they are writing Buffy or Angel fanfic, it will be smart, witty and genuine. It's not a simple task.
In the gaping sea of information we call the internet there exist many outlets for creative works and varying genres of creativity among them. One of the more extensive, and in some cases more underground, bodies of works is the collection of "Fan Fiction" that fills the databases of journaling websites like FanFiction.net, LiveJournal.com, FictionAlley.com, and many others.
Fan Fiction, for those of you not in the know (and those of you not so good with context clues), is a creative work of literature in which the author (the "Fan" for our case) makes extensive use of another author's (THE "Author" from here on out) characters and settings. This is often done as an homage to the original author's work, but commonly is utilized as an outlet for the Fan's personal desires and fantasies. Much of fan fiction is G-rated, but a large component of the fan fiction universe is dedicated to creating sexual works exploring relationships between characters that might never even touch within the realm of the Author.
These relationships are oft referred to as "pairings" or "ships" and are designated in the following manner (I will use Harry Potter characters as examples since they are easily recognized):
This particular designation is an indicator that the fiction within focuses mainly on the relationship between Severus Snape and Harry Potter from the Harry Potter universe designed by J.K. Rowling. Note: this indicator alone implies romantic, but not necessarily sexual, content as the main focus of the piece. This designation may be extended with multiple slashes to indicate the inclusion of multiple parties (usually threesomes, but sometimes... well, let's just not go there).
Another commonly seen Fan Fiction designation is the marking "OTP" or "One True Pairing", indicating that the Fan believes this pairing to be the ideal for these two characters. Examples of use:
That last one was thrown in for all the Supernatural fans out there. The equation syntax also occurs with slashes in lieu of pluses and does not necessitate the equals sign. Over time, the fan-fic crowds found that "Snape/Harry" or "Harry/Hermione/Ron/Dean/Seamus/Dobby" took far too long to type or just weren't nearly fun enough to say so mashup names or other fun names were developed to take their place. You will often find Snape/Harry shortened to "Snarry". Some places, like SugarQuill.com, prefer to use colloquial names like "The Good Ship" (referring to Hermione/Ron) or "Orange Crush" (referring to Harry/Ginny).
Perhaps the most impressive facet of the Fan Fiction world is the sense of community and fellowship amongst the Fans (both those that write and those that do not). Livejournal.com is filled with groups hosting fiction marathons, themed fiction, and the interesting idea of gift fiction. One such group is "Merry_Smutmas".
Fan Fiction authors are a tight knit group (well, within each "Fandom", or fictional universe. Harry Potter fan-ficcers and StarGate fan-ficcers may have very little cross over in participation). As well, it is reported that as much as 96% of all Fan Fiction authors may be female. It is no such surprise then that the community is often fraught with drama. Sometimes this comes about for reasons like Cassandra Claire's plagiarism, sometimes it's for something as minor as one Fan publicly announcing a personal problem with another Fan or a dislike of another Fan's work.
Drama aside, the Fans' ability to come together to create is impressive, to say the least. Conventions sponsored by companies such as Harry Potter Education Fanon bring hundreds to thousands of fans together to discuss their favorite stories, write more stories, and experience "their" universe together. These conventions are usually non-profit as the idea of profiting from Fan-Fiction in any way is still highly controversial (see FanLib).
Contrary to the statements made by LadyChris and GalahadTheFish, there is neither anything illegal about writing Fan Fiction nor posting it online for the world to see, so long as the author derives no income from the work. You are not legally obliged to list disclaimers disavowing ownership of the characters (because saying "Oh, by the way, I totally don't own these. You can't sue me since I told you." would not be any sort of defense in court. "This is fair use, bitches!" would be WAY more effective.) and a substantial number of Fans do not use any disclaimer of the sort.
The legality does come into question when looking at the works of the aforementioned Cassandra Claire, who is known as one of the few Fan Fiction authors to ever strike an actual book deal as well as one of the few Fan Fiction authors ever accused of wide spread plagiarism. Much of the dialog from her well known Draco Trilogy series is, purportedly, taken from Buffy the Vampire Slayer (a popular TV series from the late 1990's) episodes. At current, it is not legal in any way to profit from Fan Fiction writings without express permission of both the Author and his/her publisher(s) due to copyright law.
Fan Fiction communities are in a constant state of flux as some groups thrive only if their source material continues to provide for them, while others continue to produce material long after the original creation fades from common popularity.
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