From Nolo:
Fictional characters can, under U.S. law, be protected separately from their underlying works. This is based on the legal theory of derivative copyrights. To obtain this type of protection, a creator must prove that the characters are sufficiently unique and distinctive to merit this protection.
A derivative work is protected as part of the bundle of rights given to the creator of the original work under federal law, specifically 17 U.S.C. § 106 of the Copyright Act of 1976.
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Some characters are famous beyond the specific book or movie in which they first appeared. Consider, for example, James Bond, Fred Flintstone, Hannibal Lecter, or Wonder Woman. These characters are much more than any particular film or TV episode. They are famous entities unto themselves, capable of launching franchise series.
Thus, the creator of such a character would want broad protection over the character itself, rather than merely the specific work in which the character appeared.
Judge Learned Hand of the U.S. Court of Appeals for the Second Circuit established the standard for character protection in a case called Nichols v. Universal Pictures Corp., 45 F.2d 119 (2d Cir. 1930), in which he stated, “the less developed the characters, the less they can be copyrighted; that is the penalty an author must bear for marking them too indistinctly.”
For example, alien characters stranded on Earth is a popular and recurring theme as portrayed in My Favorite Martian, Starman, Alien Nation, Transformers, District 9, Predators, and The Man Who Fell to Earth. The idea of a stranded alien character, without embellishment, is not protectable.
Here’s another example: A relatively unknown play, Lokey From Maldemar, featured an alien with powers of levitation and telepathy, stranded on earth and pursued by authoritarian characters. The playwright sued the owners of the movie E.T.—The Extra-Terrestrial, claiming that her character was infringed by the E.T. character. A federal court disagreed, ruling that that the character from Lokey was too indistinct to merit protection in Litchfield v. Spielberg, 736 F.2d 1352 (9th Cir. 1984).
However, once a stranded alien character acquires more distinctive features or aspects—for example, a big-headed, long-necked alien with a glowing finger who murmurs “Phone home”—it becomes distinct enough to merit protection and its owners can prevent others from using the character’s image and expression.
Similarly, a person with superpowers who wears a cape and fights crime is not protectable, because it is too generic. But if this hero acquires more specificity, for example by having a secret identity as a news reporter and a crush on Lois Lane, then he can become protectable under copyright law.
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Depending on a writer or illustrator’s specific industry, it’s not difficult to understand why the protection of fictional characters is such an important issue for copyright owners. Exploitation of fictional characters is a crucial source of revenue for entertainment and merchandising companies. Characters such as Superman and Batman are the foundations of massive entertainment franchises and are commonly protected under both copyright and trademark law.
The protection afforded to fictional characters sometimes clashes with the fair use right to comment upon or criticize those characters. This is particularly common in parody cases. For example, one court refused to permit an X-rated parody, Scarlett Fever, that used characters from Gone With the Wind. (Metro-Goldwyn-Mayer, Inc. v. Showcase Atlanta Cooperative Productions, Inc., 479 F.Supp. 351 (N.D. Ga. 1979).
Another court permitted publication of a novel using characters from Gone With the Wind but written from a slave’s perspective. (Suntrust Bank v. Houghton Mifflin Co., 268 F.2d 1257 (11th Cir. 2001).) The disparity in the two opinions—both based on Gone With the Wind—may be due to the fact that in one work the characters were lampooned in a broad sexual farce, while in the other the characters were used to provoke discussion about racial stereotypes.
In short, the copyright protection available to fictional characters is a complex issue with a good deal of money at stake. Courts will often weigh the fair use considerations against the rights of copyright owners to control derivative works. The more specific and less generic a particular character is, the more likely that the character can receive protection outside of the original work in which it appears.
Link to the rest at Nolo