Wow thank you for the really detailed response. I plan to read through it more thoroughly but one more question. Why would the parody argument not work in this case? Arc could for instance say that the characters behave differently in his game than they do in the original creation (like Chloe for instance ).
I follow a few other creators like Akabur who use a lot of different IPs in there games so im just wondering if this is something we are likely to see a lot more of, or if this case is different for some reason.
Parody, Fair Use, and the Public Domain are fun topics. Now if you make enough transformative work it could make it.
Custom modding takes time and doesn't just fall into Illusion corporate hands even if the artist did use Koikatsu. That would be like arguing all art that was made in Photoshop is owned by Adobe or MSPaint creations by Microsoft
. Disney has worked hard to rip off the Brothers Grimm but you get other knockoffs because Disney doesn't own the original characters, only the changes they themselves made.
However legally defending that is the question. Non-Profits have the excuse they didn't make money which a For-Profit couldn't use. Slightly changing a few things might not be enough and seeing what the courts say is a financial gamble.
Arc didn't change Chloe's art model and he just put her in cute poses. He included her in the $5 tier wallpapers, $10 tier Character Cards, and possibly higher tier 'custom' scenes so selling those assets and not paying royalties to the original creator for the profits he made off their work.
If you want a funny transformation work try the porno Nintendo officially owns, Super Hornio Brothers. Nintendo couldn't do anything legally so they just bought it.
