I’m more familiar with the rules for music and writing, but they’re very similar. The short, short version (keep in mind that IANAL) is that the degree of transformation is the key element—i.e., to what degree is the final product your work, and to what degree is it someone else’s work?

Whether it’s for-profit or not is, contrary to popular opinion, not hugely relevant (it’s pretty important when you’re considering Fair Use, but for transformative/derivative works it seems to be less important). That’s why someone can create a collage, exhibit it, and sell it for big bucks.

But there’s no bright-line rules, and you can probably find case law to support whatever position you want to on this, because there are always outliers that don’t get appealed.

I don’t know in art, but in music the case law has definitely trended away from common sense, so trying to figure out what is legal based on what is ethical is pretty much pointless. Plus there’s all sorts of stuff that isn’t legal precedent now, but could fold into a case.

One example: legitmix.com, a site that only a record label could love: they’re implicitly asserting that the only way to legally buy a 5-min song that has bits of 80 songs in it (and therefore is using no more than a few seconds of any given song, even given the overlaps) is to buy every single one of those sampled works. It’s like saying that you can’t listen to John Williams’ Star Wars soundtrack unless you also own a recording of The Planets. There is no room in the record labels’ world for a new work that, while building on previous works, has transformed them to the point of being it’s own thing. I mean, I generally DJ Earworm’s annual “United State of Pop” mashups, but there’s no way I’m gonna buy the songs they sample, because I generally can’t stand most of them. Clearly a work that turns songs l can’t stand into music I love is pretty significantly transformed, and more new than old. But the remixers have, for the most part, not taken this to court, so for now the labels’ assertions are the de facto law of the land.