B holds no right to a copyright, if his work infringes on A's right to X. So he can't win against A and neither C or lawfully demand a C&D from C. See Anderson v. Stallone, 11 U.S.P.Q.2d 1161 especially IV A 4:
- Since Anderson's Work Is An Unauthorized Derivative Work, No Part Of The Treatment Can Be Granted Copyright Protection
Stallone owns the copyrights for the first three Rocky movies. Under 17 U.S.C. section 106(2), he has the exclusive right to prepare derivative works based on these copyrighted works. This Court has determined that Anderson's treatment is an unauthorized derivative work. Thus, Anderson has infringed upon Stallone's copyright. See 17 U.S.C. section 501(a).
Plaintiff has written a treatment which is an unauthorized derivative work. This treatment infringes upon Stallone's [*31] copyrights and his exclusive right to prepare derivative works which are based upon these movies. 17 U.S.C. § 106(2). Section 103(a) was not intended to arm an infringer and limit the applicability of section 106(2) on unified derivative works. As the House Report and Professor Nimmer's treatise explain, 103(a) was not intended to apply to derivative works and most certainly was not an attempt to modify section 106(2). Section 103(a) allows an author whose authorship essentially is the arrangement or ordering of several independent works to keep the copyright for his arrangement even if one of the underlying works he arranged is found to be used unlawfully. The infringing portion would be easily severable and the scope of the compilation author's own work would be easily ascertainable. Even if this Court were to interpret section 103(a) as allowing an author of an infringing derivative work to sue third parties based on the non-infringing portions of his work, section 106(2) most certainly precludes the author of an unauthorized infringing derivative work from suing the author of the work which he has already infringed. Thus, the Court HOLDS that the defendants are entitled to summary [*32] judgment on plaintiff's copyright claims as the plaintiff cannot gain copyright protection for any portion of his work under section 103(a). In addition, Anderson is precluded by section 106(2) from bringing an action for copyright infringement against Stallone and the other defendants.
Note that any change to a work - even a single stroke or word, or cutting out a single frame - makes something out of necessity a derivative work. No alteration whatsoever makes it a pure copy. And using figures from a work in a different setting makes them, by necessity, a derivate, as in Anderson v Stallone.
However, even if B's work was licensed or fair use (which can be done by critically recutting a work as in the h3h3 case or in Akila Hughs v Carl Benjamin aka Sargon of Akkad) and thus doesn't infringe on A's right, C still doesn't infringe on B's work: C's work is a (recreated) copy of A's original work, making it an infringement of A's work, but not B's altered work.
Fair Use is explicitly not infringing under 17 USC § 107