Fanfiction is proof that people will write and distribute stories even without the prospect of monetary compensation.
I don't get the attitude of the article in the OP:
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But what happens if, in the free-for-all of online publication, a spin-off book starts to eclipse the original from which it derives? Does the author bring in the lawyers? Or will it be too late to stop the bastard offspring from zooming all over cyberspace?
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The point of copyright was to encourage creative people to create. Why would anyone lament the creation of a better story just because it is based on what someone wrote [insert variable amount of time] years ago?