According to the US copyright act, the legal definition of Derivative work is as below:
"It is formed on the basis of one or more pre existing works, such as translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, are reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaboration, or other modification which, as a whole, represent an original work of authorship, is a derivative work."
So before giving a thought about using somebody else's creation without following the copyright acts, you will end up facing the court trials. Only the exclusive copyright owners have the right to produce a derivative work. Anybody else, other than the copyright owner, can create a derivative work only when the owner grants the permission to do so on the basis of valid license and agreements. If they do not permit, then you do not have the right to use their work in any other way or form. The license required for modifying, transforming and creating new form of the pre-existing work is General Public License (GPL).
However, there is something called as, "Fair Use". There exists a thin line between Fair use and Infringement of copyright. In some cases, using the author's language becomes necessary to convey the right information across to the public. For instance, while writing a book review, it becomes important to use just the same words as used by the author, which is considered as Fair Use. Another case where fair use is widely seen is parody. Parody is used for making fun of somebody's work or for the aim of criticizing. It is not as easy as it sounds to have fair use in practice as people like us cannot exactly draw out the limit, as to where to stop for the Fair use and then finally have to pay up for going against the laws. Court scrutinizes and weighs things differently by taking various rules and regulations into consideration.
However, according to the Canadian law, the copyright act does not strictly define derivative work. It states, there is no derivation, transformation, or creation of a new or original copy unless it includes artists' work.
The copyright protection for derivative work encompasses two major things. They are:
One important point to know is that, copyright of an owner is valid throughout the life span of the respective owner. It cannot be extended by the copyright owner or by a licensee.
In the history of derivative work, there have been some great pieces of creations. One of them is, "Monalisa with a moustache", infamously known as L.H.O.O.Q., created by Marcel Duchamp. He transformed the original piece of art by Leonardo Da Vinci by adding a moustache, a goatee and other minute changes. This derivative work had drawn a lot of critics. Another was the parody of "Oh Pretty Woman". Trivia books are based on the derivative work of Television shows, like Seinfield and others. One of the most memorable musicals ever, "West Side Story", is a derivative work based on Shakespeare's, "Romeo and Juliet". However, Romeo and Juliet also is a derivative work, inspired by "Pyramus and Thisbe", which is a roman story of two lovers in the city of Babylon. These were a few examples of derivative work.
With technology running at its pace, if you want to create and publicize some of your own stuff, ensure that you have done a solid research behind it. Else, get in touch with a copyright lawyer or get a copyright license for avoiding any kind of legal complications.