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In my academic paper, I have well over 100 figures, and would like to use an artwork I found online in one of my figures - it is not published in any book, it is just something they made and posted online. I would be using 1/6th of the author's artwork figure, and it would be so heavily modified it would barely be recognizable. The modified artwork would take up 1/40th the space of 1 such diagram (out of 100+) and used once only, it is a minor element of my figure.

(1) Do I need to cite the artwork in this case?

(2) Can you give any guideline on when an artwork citation is needed?

(3) Am I required to get permission from the author, or is it a courtesy to the author only?

(4) How would one cite an artwork in their dissertation?

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    Is the artwork accompanied by a license? (For some artwork-publishing sites, there might even be an implicit one stemming from "posted here."). If so, that should tell you what you can do with the artwork and how you should attribute it (cf. various flavours of Creative Commons licenses). – Angew is no longer proud of SO Aug 2 '15 at 12:33
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Simply contact artwork's author (since the artwork wasn't published, the author is copyright holder, otherwise it usually would be the publisher), requesting permission to adapt the artwork. I suggest sending the author planned version, so that any potential issues can be assessed and addressed.

(1) I'd say Yes. The citation is usually located below or above the figure in the following form:

(Adapted from “The DeLone and McLean model of information systems success: A ten-year update.”, by DeLone and McLean, 2003, Journal of Management Information Systems, 19(4), p. 24. Copyright 2003 by M.E. Sharpe, Inc. Adapted with permission.).

(2) Since artwork is someone's intellectual property artifact, protected by copyright, it is usually (for an exception, see fair use in the next point) required to cite the artwork (as any other such artifact) to properly credit its authors. The format of citation depends on the publication style you're using (my example above is based on APA Style).

(3) You're required to get permission, unless you want to risk by using the fair use legal doctrine.

(4) If the artwork is part of a figure, see example above; otherwise, other relevant standard citation guidelines for visual elements apply, based on the publication style you use.

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    +1 but actually, the artwork was published: it was made available to the public (which is what "published" means) by being placed on a website. That's how the asker, who has no connection with the artist, was able to find it. – David Richerby Aug 2 '15 at 12:32
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    You are conflating the copyright and academic etiquette issues. Unless the copyright license explicitly states that a mention is required (e.g. CC-BY), citing the artwork is purely for giving proper academic credit. – Mangara Aug 2 '15 at 13:22
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    @DavidRicherby: Thanks. Good point, however, when I said "published", I implied publishing in a peer-reviewed outlet, which usually transfers copyright from the author to publisher (I noted that specific aspect). – Aleksandr Blekh Aug 2 '15 at 20:50
  • @Mangara: I'm conflating them, because both issues are present and should be addressed. Moreover, IMHO, using a copyrighted material (in original form or adapted) is not only an academic etiquette issue, but a legal one. Authors' attribution is a part of authors' moral rights, which are protected by copyright law. – Aleksandr Blekh Aug 2 '15 at 21:11
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    @AleksandrBlekh Moral rights are not recognized everywhere (despite their inclusion in the Berne Convention), in particular in the United States. – JeffE Aug 2 '15 at 21:21
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You have two issues I can recognize, neither is of how much space a figure takes up.

First, you have an issue of copyright. This applies to any work that is being disseminated in public, especially published or monetary work, yours the former. For copyright, there are certain laws (based on country) that you must follow. This relates to how much of an original piece you need to modify before you are not infringing on the artwork. This is hard to discuss online and without an expert.

The second issue is of academic publication. It is better to be on the safe side, but also taking the risk of not citing some work can look very badly on you, and also be considered plagiarism. Most often, if you would like to use someone elses image with some modifications, you should be citing it as 'Modified from X'. Unless you are using some photograph, and tracing over it to make some line drawing for a particular outline of some device, I would always use the 'modified from' citation.

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    "[Copyright] applies to any work that is being disseminated in public, especially published or monetary work" Copyright has nothing whatsoever to do with money changing hands. The only connection is that somebody who profits financially from violating copyright is more likely to be pursued through the courts and more likely to be punished more severely. – David Richerby Aug 2 '15 at 12:29

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