The Doyle estate is considering appealing the ruling by a judge in Chicago who said that other authors were free to depict the character in new mysteries without seeking permission or paying licence fees, now that copyright protections have expired on nearly all of his tales about the detective.
The ruling does not affect 10 stories still protected by copyright but relatives of the Scottish physician and writer are considering an appeal. They argue that Conan Doyle continued to develop the characters of Holmes and Dr Watson in the later works so they should remain off-limits until the remaining copyrights run out at the end of 2022.
William Ziesk, lawyer for the estate, said the ruling has implications for other famous characters, such as Ian Fleming's James Bond.
He said: "Whatever decision they make will essentially determine the fate of many characters, not just Sherlock Holmes and Dr Watson, but very intricate characters such as James Bond. What happens as copyrights expire on Ian Fleming's original stories?"
But author Leslie Klinger, who brought the case against the Conan Doyle Estate Ltd to settle the matter, said: "It's a bogus argument. It means you can reprint Conan Doyle's own stories freely but you can't make up a new story? It doesn't make logical sense."
He now plans to finish work on In The Company Of Sherlock Holmes, a book of original short stories featuring characters and other elements from Conan Doyle's work.
If appeal court judges uphold the ruling, it could lift the threat of legal action for the untold scores of writers churning out pastiches and fan fiction without permission.