Some of you may have heard of the case of AP v. Shepard Fairey. Fairey created the famous Obama poster on the left. It was based on this AP photo on the right.
AP claims that Fairey violated the AP's copyright in the photo (photos can be copyrighted because the selection of angle, color, brightness, etc. illustrate sufficiently the creativity and originality required to secure a copyright). Many in the legal field have been making the case that Fairey is in the clear here due to the doctrine of fair use. For a good fair use analysis, see Tim O'Brien's blog here.
Essentially, I think this is right. Fairey has clearly created a derivative work of the AP's photo. Derivative works are adaptations or visible reuses of an existing work. The right to create derivative works based on one's original work, lie within the copyright of the original author. Fairey added his own creativity to the AP photo, but his poster is clearly based on the AP photo. However, up to the point the suit was filed, Fairey hadn't made any money on the poster; any revenue generated by selling the posters was reinvested to make more posters. Lack of commercial profit is a factor in the fair use analysis. Further, and I think more importantly, the work should be considered "transformative" in that it added something to the social discourse (the election). Transformative works are more often than not considered fair uses -- we want people to create more works that add to the social discourse by commenting on works already in the public sphere.
I think the only possible problem Fairey's fair use defense will run into is that the AP's market for their photo as a poster. Under the ruling in the National Geographic Society v. Classified Geographic, Inc., 27 F.Supp 655 (D.Mass 1939), if a copyright owner has a market for derivatives of its own work, fair use will not prevail. However, as the AP is supposed to be in the reporting business, and not in the campaigning business (although the AP's "neutrality" has been called into question a number of times), the chance they were going to make and sell Obama campaign posters is virtually nil.
All in all, it doesn't seem like the AP really has a case. In fact, this is eerily similar to the Jones Day case we discussed below; another case of an entity with a lot of money trying to push around a small fry. I know, this happens all the time, but I just hope Fairey holds firm and sees this through. The AP has already been dropped by a number of papers and is facing a fiscal crisis of its own, so perhaps Fairey can do some pushing of his own.