Let's say there is a photo of a group of people in the newspaper. This photo is copyrighted by the newspaper publisher. By cutting out a single face from this photo I am modifiying the original work. I think it's not allowed to modify a copyrighted work. So it should be illegal. But because it is so ridiculous I am not sure about it. To keep it simple I am asking for an answer that applies to the U.S.
Those posts are talking about making a modified copy of a copyrighted work. The key word is copy. You are not making a copy. Copyright is not about how a physical embodiment of a copyrighted work is treated.
You can burn a book and shred a newspaper. Neither of those actions is making a copy.
Also, cutting up a newspaper and pasting a picture on your wall has nothing to do with any “derivative works” issue.
The problem is that the internet is wrong when it comes to the wording of US copyright law. There is no prohibition against modifying an original work. The law, 17 USC 106, says that
...the owner of copyright under this title has the exclusive rights to do and to authorize any of the following: (1) to reproduce the copyrighted work in copies or phonorecords; (2) to prepare derivative works based upon the copyrighted work...
A "derivative work" is defined as
a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship, is a “derivative work”
You might think that cutting out a face from a newspaper is creating a derivative work. But there is a further limit on the copyright owner's right that
the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord
Thus you do not need the permission of the copyright owner to "dispose of" a part of an owned copy of a protected work.
When you make multiple copies of the thing that you build from purchased parts, that is where you would be infringing copyright, in creating a derivative work that is not covered by the first-sale exclusion. If you want to make 100 copies of a piece of art incorporating a newspaper photo, you can buy 100 copies of the newspaper, and dispose of them as you like.
The key actions are reproduction and distribution. Reproduction is the act of "copying" and includes modification, or technically, a "derivative work". Distribution is the transfer of possession. Whether anything is received in exchange is irrelevant. It is both actions in tandem that makes a copyright violation. You can make copies of your stuff, but you cannot distribute it. You can resell your lawfully purchased copy (a DVD, a painting)1, but you cannot sell the copy of it that you made.
It's illegal to reproduce and distribute a copyrighted work. You can do whatever you want to your personal copies of stuff, except reproduce and distribute. This includes modification. If you have a legally obtained copy of the newspaper and you want to cut it to bits, that it perfectly legal. If you want to make art out of it and hang it on your wall, still legal. If you attempt distribution, even if just giving it away, it's technically not legal. So if you clip out your nephew's face from the newspaper and send it to him, that might technically be a copyright violation, but it's a single instance and seems very unlikely anyone will care. If your nephew's face in the picture is particularly interesting, so you put it on mousepads to sell on Amazon, well, now you might get a C&D from the publisher, and they'd be in their rights to force you to stop and pay damages.
- Large content producers attempted to make even this illegal, but they failed. The repercussions, if you were not allowed to transfer ownership of your legally obtained copy, would have been transformative in the content and media industries. Rental stores and libraries, for a start, would have been in violation. The impetus to create blank media for sale would have diminished, which would have in turn stunted technological advancement. This is more or less the first sale doctrine. It's actually a very interesting part of the copyrights story, and, in my opinion, an example of the excesses that art and media attempt to gain over their consumers.