Even if it were legal, it would not necessarily be ethical. People incorrectly assume that when something is ubiquitous, it should belong to the public.
Super Mario is not something that has always existed or would eventually exist, it is a creative work that became successful through Nintendo's efforts. There is nothing wrong with Nintendo wanting to reserve their rights to it.
That is not to say that Mario fan works are not enjoyable - there are awesome Mario ROM hacks and Flash animations out there - but that people shouldn't feel entitled to the rights to make them and to complain when Nintendo takes legal action.
Super Mario is not something that has always existed or would eventually exist, it is a creative work that became successful through Nintendo's efforts. There is nothing wrong with Nintendo wanting to reserve their rights to it.
That is not to say that Mario fan works are not enjoyable - there are awesome Mario ROM hacks and Flash animations out there - but that people shouldn't feel entitled to the rights to make them and to complain when Nintendo takes legal action.