[thejeff]

I don't know. I don't really think the "fan fiction" vs "derived fiction" distinction is anything like common usage, especially since this thread is the second result of a Google search on "derived fiction".
It sounds like someone not wanting to admit to writing, or reading, fanfiction, so they come up with a different name to distinguish the sub-category they like.

I'd also argue that while Sturgeon's law certainly applies and you're unlikely to find great literature as fan fiction, suggesting that anyone with actual talent won't write fan fiction because they can actually make money writing, vastly underestimates the difficulty of making a living writing. I've got a friend who's a reasonably successful writer with a dozen or so books published in the last 4 years, after years of trying to break into the industry. I make far more as a fairly low paid computer geek than she does. So I don't find it too unlikely that someone with writing talent and another career might write fan fiction as a hobby.