From The Digital Reader:
As you probably know, the vast majority of the Holmes stories are old enough that they are no longer in copyright in the US. (The author died in 1930, so his entire body work is public domain everywhere but the US.) In the US you can legally download nearly any of the Holmes stories from sites like Project Gutenberg. If you wanted to, you could then format the stories as ebooks or bind them into a paper book and sell the stories. This is completely legal.
But according to the Conan Doyle estate, one thing you cannot do is write a new story that features Sherlock Holmes. There is exactly one remaining Conan Doyle book, The Case-Book of Sherlock Holmes, that still contains copyrighted Sherlock Holmes stories – 10 stories, in fact. Because some of the original stories are still in copyright in the US, the estate believes that they can control who writes new stories. They are using that control to collect fees from publishers, studios, and anyone with deep pockets.
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US copyright law protects a work as a whole, not the elements in a work.
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If the elements of a story can be copyrighted and not the work as a whole, then all of the Sherlock Holmes stories that have entered the public domain include a copyrighted element. If the Holmes character is still under copyright then arguably you cannot do _anything_ to _any_ of the Holmes stories. They all mention a copyrighted element and thus cannot be used.
Link to the rest at The Digital Reader