LogFAQs > #976107673

[LFAQs-redacted-quote]

The rights holder generally has the final say in how the IP gets used. Theoretically, there's not much legally getting in the way of the rights holder going after anyone who so much as draws a character because they think it's cool, although obviously it's never worth it due to the resources required and the awful PR that would be generated.

Fangames could absolutely hurt sales, although it's rare that they get such clout. As an example, there's a lot of people who think that Another Metroid II Remake is the best version of Metroid II. It's perfectly plausible that some people who wanted an updated version of this game would go for the fangame over Nintendo's official remake, especially if they didn't have a Nintendo platform. I would argue that demonstrates an unmet need in the market, but the law would argue that this infringement on the IP has cost Nintendo.