Because we live in an era of technology, (or evolving technology) the answer may not be as simple as “yes, I agree,” or “no, I disagree.” To some extent I agree with both parties.
Shepard Fairey’s use of the photograph was within the confines of the “Fair Use” provision under the Copyright laws in the United States. His rendering of Barack Obama was altered extensively, but much more importantly, his rendering provided new meaning, context, and expression. His artwork of Obama incited the market, having an effect that bolstered the value of the original photograph. Within the confines of “Fair Use” provision, Fairey had the right of way.
However, just because he may be within the confines of “Fair Use,” does not mean he is not obligated to credit the original artwork and compensate a portion of the profits.
As for the Associated Press arguing that Fairey stole copyrighted work? Let’s look at it from this angle. The Associated Press is a news agency that covers various stories, runs numerous ads, and posts photographs. Where did they get the idea of doing that? Yes, their stories are different (or similar) the photos are different and the ads may even be different; however, the basic format of a newspaper is something all newspapers have in common. They are not the ones who invented the newspaper; are they in violation of the copyright laws.
Innovation comes from various ideas, and some of those ideas are nothing more than someone’s work modified. Without the ability to transform an image, a car, a computer program, or any other idea, we would be living in a society that stifles innovation.