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I was thinking about developing a sidescrolling platformer very similar to an old Mario and Luigi game for NES. To start out I was thinking about taking the images from a site like this:

http://www.mariouniverse.com/sprites/nes/smb3

Which clearly states a copyright. I was wondering how far I am allowed to take these images. I figure I'm probably allowed to use it for personal development, but what if I publish the game as an exe file and send it to some friends? I figured a definite no-no would be selling the game with the copyrighted images included.

A secondary question would be whether or not I would be allowed to modify them slightly and then call them my own.

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It's worth noting that the question "what's legal" and "what can I get away with" are two separate questions. Likewise, there are specifics involving your country/state of origin in play. But suffice to say: if you have to ask, you likely can't do it. Also, the only person who can really offer you legal advice is a lawyer. –  Tetrad Jun 26 '12 at 4:40
    
I just assumed since this was a game development forum that people had developed games and might've ran into this problem before. I'm in Maryland (USA) in case anyone has advice about it and doesn't charge monies –  TMP Jun 26 '12 at 22:06
    
Most people use their own graphics, or find explicitly free-to-use images of some license or another. –  Tetrad Jun 26 '12 at 22:14
    
Alright, I think I'll probably just end up finding explicitly free images. Thanks you! –  TMP Jun 27 '12 at 1:47
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Disclaimer: not a lawyer (yet). Nothing here is legal advice.

Nintendo doesn't have to argue that you harmed them; violation of a copyright is a strict-liability offense, regardless of whether you sell the game, send it for free, or even keep it for yourself. Fair use could work in certain cases, particularly if it's noncommercial and won't supplant Nintendo's place in the market, but it's a weak argument at best.

As for modifying them slightly, the test is whether there is substantial similarity between the two works. If you make major modifications such that no one would really think they came from a copyrighted Nintendo source, you should be fine.

If you can get your hand on public domain images or create your own, do that. Chrono Trigger HD and Chrono Resurrection are good examples of why you shouldn't try to use copyrighted works.

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The issue with doing this is a civil one, not a criminal one. As such, the real question becomes "can Nintendo argue that you've harmed them"? If the answer is yes, their civil suit will likely result in you paying damages.

The only safe play is not to use copyrighted material.

Of course, fair use exists, but distribution for anything other than artistic or educational purposes invalidates that defense. Even so, fair use is not trivial to argue.

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