Sherlock Holmes and Dr. Watson were fictional, of course, but Lauren Ipsum has convinced me that if they were real people, a story about a "drug-using detective and his MD sidekick" might expose a writer to a charge of libel. (A story about a detective and sidekick would not be a problem.) Suppose I reversed the order and made it a story about an medical doctor detective and ne'er do well crack-using sidekick. (This is the more expected sequence; Holmes and Dr. Watson are "unusual" to say the least.) Would that differentiate the characters sufficiently from the original?
Another theme I've toyed with is that of "Ivan and Donna," where Ivan is a mogul from East Europe and Donna is his ritzy American wife. Most people would recognize them as Donald and Ivana, of course, but since I've "mixed up" the two characters, would that make it impossible to tell where one character ends and the other begins?
Or could that even pass as "parody."
Answer
You really should be asking a lawyer rather than a group of writers.
I am not a lawyer, but my understanding is that for something to be "libel": (a) It must be written or printed, i.e. not simply spoken (that's "slander"). (b) It must be about a "clearly identifiable person". (c) It must be false -- truth is an absolute defense against libel. (d) If it is about a public figure, it must be given with "actual malice", i.e. you must have known that when you said was false and not just have made a mistake. If it is about a private individual, the standard is "negligence", that is, you failed to take responsible steps to verify that the information was true before printing it.
So I guess for you the question is about how close your fictional character can be to the actual person before it counts as "clearly identifiable". I doubt that there's a bright line there. Obviously if you use the person's real name, real occupation, give a physical description, and list his address, that's "clearly identifiable". If you wrote a story about, say, a corrupt senator, where his name, description, etc did not particularly match any real person, the fact that there are corrupt senators in real life would not be sufficient for one of them to say that you were libeling him. (I have this sudden image of someone arguing in court, "He said that the character in his book was an evil, cheap, lazy, corrupt, philandering, worthless drunk. Obviously he was talking about me!") If you change the character's name from "Miller" to "Diller", is that enough? Probably not. But how many letters do you have to change? What if you changed "Miller" to "Deller" or "Delmer" or "Delmar" or "Delman"? At some point I'm sure a court would say that there's no longer any real similarity.
Are you trying to push the limits so that you can say nasty things about some real person while avoiding libel charges? Like, you want to accuse some famous person of secretly being a racist or a drug dealer or whatever because you hate him and want to ruin his reputation? If that's the case, I think you're treading on thin ice. If the resemblance is clear enough that a typical reader will understand who you're talking about, then the judge and jury will get it too. If the resemblance is vague enough that it's not obvious to the judge, then it won't be obvious to most readers either.
Or is it that there is some real person that you think would make the basis for an interesting character in a story? Like, you read about some political scandal in the news that you think is interesting, and you want to write a fictionalized account? In that case, the easy answer is to just change the characters enough to make them unrecognizable. Don't change "Donald" to "Ronald". Change "Donald" to "Larry". If the real person was a tall, thin white man from Massachusetts, make your character a short, fat black woman from Oregon. Etc. Only keep the aspects of the character necessary to make the story work.
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