I have a slightly complicated use for defend that I want to run by everyone before I write my next Critical Hit article. To not reveal what my featured team is, I will use things like "Character A, B, C" and so forth. Character A has the Sidekick feat on him so that he can share his defense with Character B. Character B also has defend. Can Character B now use his new defense gained from sidekick to share with his teammates C and D (Assuming all prerequisites of adjacency are met)?

I don't see how a diagram will help, but here is one anyway.

A
B
C D

Sidekick only activates when the Sidekicked figure is attacked, so character B will only be able to pass on character A's defense when B is attacked - if only C and/or D are attacked, they will have to settle for B's natural defense.

So it would only be benificial if your opponent targeted say B and A with a ranged attack then?

It only works when the sidekick (B in this case) is attacked, but the attacker is of course free to target any other figure in the formation as well.

Would this all activate if Energy Explosion were used?

Hmmm... I think we need to take a closer look at the wording of the card:
The relevant clause has been highlighted - it all comes down to whether being affected by splash damage counts as "being attacked" or not.
From the wording of Energy Explosion, it seems the "splash damage" effect is established after the attack roll has taken place - in other words, the Sidekicked Defender would only be able to lend the Sidekicked Defense once the hit has already been made. Or to put it another way, no dice.
This is just my interpretation though.

My strategy was shot down after the first response, anyways. I was just trying to establish a "for instance" that would allow the strategy to work. Turns out the strategy doesn't work no matter what. Thanks guys!