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Definitely seems clearly to be a derivative work and a copyright violation.

Yes, it's clearly a derivative work. That doesn't necessarily make it a copyright violation. My reading of the fair use exceptions make this clearly not a copyright violation. The problem is that you can't know for certain until a judge agrees or disagrees.

The guy folded, yes, but not because he thought he would lose, but because even fighting and winning would be too expensive.

Read my original "... derivative work and copyright violation" as two distinct statements not cause and effect.

Looks to be to be clearly a derivative work and clearly a copyright violation based on it not meeting any fair use requirements.

There are no specific requirements to be considered fair use. There are four factors that are weighed: the purpose and character of the new work, the amount copied from the old work, the impact on the market for the original work, and the nature of the old work. None of them are binary yes/no requirements.

The purpose of the new work is commercial (point against fair use) but it's also a transformative commentary on the old work, bringing new aesthetics to it (point for it). (In fact, one of Maisel's complaints seems to be that it has been transformed [1]). The amount of the old work used is the entire work (point against it). The impact on the market for the old work is minimal -- it's not an adequate substitute (point for fair use).

The final factor, the character of the old work is a factor that is very hard to predict how a court will analyze. One common distinction is "fact or fiction". A photograph of person is closer to the factual category than fiction, though the category division doesn't make much sense to apply here. It is well known and iconic, so this use doesn't "preempt" the first public presentation, which some courts have considered as relevant. Overall, I'd say this factor argues in favor of fair use, though not necessarily strongly.

It clearly meets some fair use factors, contra your claim. Enough? Well, as I said, that's not going to be determined outside a courtroom.

[1]: Maisel told his lawyer that he would never have granted a license for the pixel art. "He is a purist when it comes to his photography," his lawyer wrote. "With this in mind, I am certain you can understand that he felt violated to find his image of Miles Davis, one of his most well-known and highly-regarded images, had been pixellated, without his permission, and used in a number of forms including on several websites accessible around the world."

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