Legal question regarding Disney and copyright issues: "The Little Mermaid"?

The original 1837 Hans Christian Andersen story is in the public domain. Disney's particular expression of it is copyrighted.

Depending on how you market your work, you may indeed run into trademark issues with Disney's version. Though they most likely refer to their version as "Disney's" The Little Mermaid, you may want to pick a different title down the road to avoid confusion. Do also be aware that Sofia Coppola recently announced plans to do a live-action version -- again, likely to result in confusion if you don't change the title of what you're doing.

Yes there is a legal issue concerning your novella. Not only it is based as you said to the original Hans Christian Andersen's "the little mermaid" you even call your own novella the same as what HCA in his book "the little mermaid". It is a well guarded copyright, and any infringement of any kind like title or similarity of it to any article or novels can be construed to be copying the original theme. Everything that pertain to 'the little mermaid' is a trademark. Even if your story is quite different with the original 'the little mermaid' you are still copying the original because your title is "the little mermaid". People will assume it is the original story of Hans Christian Andersen. Unless you can prove otherwise, you can be sued by the owner of the rights of the "little mermaid" that own it. Do you know how much they will sue you for this? Approximately $12 million. Even if you sell your house/lot you cannot pay that kind of money to the owner of "the little mermaid'. But if your novella is entitled "the mermaid", that is a different story. It can be distinguish from Hans Christian Andersen of the "little mermaid". But if you want to give tribute to the original owner or to Hans Christian Andersen for your novella, you have to pay the rights to have the copyright of it. It is like paying a fee of some sort in order to write a novella about the same theme as that of "the little mermaid", otherwise, you are facing a lawsuit that even for your 25 years, you cannot pay that kind of damages.

You cannot call your book "The Little Mermaid" because there IS ALREADY a book by that exact name, as you said yourself. It should be a no brainer. Why don 't you call it "Mermaid ...something or other"?