I've recently found out some of the artwork in my current project is derivative work done by our previous artist. These pieces (bitmaps) are heavily modified and no pixel remains the same. In general, only the basic shape remains the same. For instance, assume that you took an image of a Nazi soldier and turned him into a zombie wearing Nazi gear and scaled him up from a 32x32 image to a 128x128 image, while adding the necessary detail.
Any reasonable person would conclude they were both the same shape and design.
So, the original images are copyrighted and not available for distribution. At what point, if any, are we allowed to use our scaled up/derivative image or do we have to dump this and start fresh?