Okay Squidi you linked to the site about copyrights so let’s use it. Let me say though that this is nuts. We are talking about someone using a heavily modified version of your highly derivative sprite art as a forum avatar. This is not something that would ever make it to a court. For the sake of argument though let’s say it did. This is from the web site you linked to pal. These are the questions that would need to be addressed in court to determine if the artwork was covered under fair use.
1. The purpose and character of the use (the more transformative defendant’s use, the more likely to be fair use, whereas if defendant merely reproduces plaintiff’s work without putting it to a transformative use, the less likely this use will be held to be fair; further, the more commercial defendant’s use, the less likely such use will be fair),
Okay so let’s apply this to our little situation here. The artwork in question has been transformed and altered and it is not being used commercially. So far it looks like the artwork would be protected under fair use but we have more things to consider.
2. The nature of the copyrighted work (the more creative and less purely factual the copyrighted work, the stronger its protection),
Okay in our case the work was creative. You might have an argument here if the rest of the points weren’t against you.
3. The amount and substantiality of the portion the defendant used.
This one is harder to judge. Personally I’d say that less than 10 percent of the original artwork remains unaltered. It’s obvious that the basic shape and size of the character was used but that’s about it. Very little of your copyrighted character actually remains.
4. The effect of defendant’s use on the potential market or the copyrighted work.
Someone using your artwork as a forum avatar does not hurt you in any way. In fact all it could possibly do is increase awareness of your comic strip which is a good thing.
Like I said, it’s silly to even bring this up as this is not something that would ever go to court. But if you are going to link to websites in an effort to defend your position you should try reading them first.