|And then Indiana Jones|
fights Lord Voledmort...
Fair use and copyright expiration, as I tell my library research students, exist because we need to be able to build on what's come before to create something new. Anything published before 1923 is already fair game, so we've seen books like Wide Sargasso Sea and Silver: Return to Treasure Island. There have been a plethora of Pride and Prejudice riffs, some of which would have Jane Austen spinning in her grave. (Or, in other versions, rising from her grave to kill upstart writers.)
I love to see ideas and characters get a second life, but fan fiction? Some (a lot) of it is dreadful. Some (a shocking amount) is pornographic because people have sick minds. According to paidContent's article, there will be some limits on what will be published:
Kindle Worlds won’t publish all of the works submitted to it; it will only accept some (though the company says it aims to accept as many as possible, as long as they adhere to content guidelines).The content guidelines rule out slash fiction and other fantasies, so there's that at least.
I've seen two kinds of reactions so far. There are writers who are miffed that the fanfic writers will lose their copyright, which is prevented be a lot of author guild rules. The other reaction is horror that fan fiction will gain some legitimacy through Kindle Words. The reaction I haven't see is no one is pointing out that neither Kindle Words nor the potential authors are asking permission of the living copyright holders. In this instance, I think copyright is protecting characters and ideas and settings from being cheapened by writers who can't or won't stay true to them, or who don't have the chops or wit to make something new and shiny out of them. To me, that's more important than the money that would be changing hands.