You are correct that if a work is in the public domain, anyone can copy or create their own derivative work based on it. However, you also must steer clear of other people's derivative works to avoid infringing THEIR rights. A good example is the current situation of Disney's remake of the Wizard of Oz titled, "Oz, the Great and Powerful." The Baum book is in the public domain but Warner Bros. still has copyright protection in its 1939 screenplay and film, and recently filed to register the trademark "The Great and Powerful Oz." Warner Bros. is known to enforce its rights in the Oz characters even though the underlying work is in the public domain. You can read more about this at http://www.hollywoodreporter.com/thr-esq/wizard-of-oz-disney-warner-bros-289305. You should consult someone about the details of your proposed work before you start writing.
Answered on Jan 20th, 2013 at 11:58 AM