Free fan games are largely ignored by game companies and sometimes actively supported, but once the game starts to look like something that competes with or damages the company's output they have to take legal action to protect their IP. This is what happened with the Chrono Trigger remake and more recently with the Unity Sonic demo that looked and played better than Sonic 4.
What I don't understand is why certain talented people don't develop original IP for these sorts of things. This happens occasionally but more often than not the projects just die after getting a cease and desist. Nostalgia is a powerful thing but its easy enough to make a game that is similar to Chrono Trigger, Ocarina of Time, Sonic, etc. using original concepts inspired by them.
I figure it's got to be the fanfiction aspect of it. I've wanted to make a Starfox 64 prequel with Fox's father, but to spend that much effort in the Silver Age of indie development on something you're not even going to try and capitalize on seems wasteful. Might as well just write the fanfiction if you want a plot. The guys over at http://www.shadowsoflylat.net/ have been busy for a long time, it's sad that they won't be able to sell the end result.
What I don't understand is why certain talented people don't develop original IP for these sorts of things. This happens occasionally but more often than not the projects just die after getting a cease and desist. Nostalgia is a powerful thing but its easy enough to make a game that is similar to Chrono Trigger, Ocarina of Time, Sonic, etc. using original concepts inspired by them.