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Is it possible to create a copyright basilisk?
(slrpnk.net)
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this post was submitted on 17 Nov 2023
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You seem to be talking via theory not actual law. Most lawyers say it would need to be tried in court but Nintendo (it was Nintendo making the claims at the time) would have a solid case. The reason is that it would allow copyright laundering: You could play the game and license the "video" to a game company which could use the assets in the video (eg: Mario) to make a new Mario game.
I reject your idea that it could allow copyright laundering. A copy of Mario from my video is still a copy of Mario. My license to play the game allows me to incorporate my gameplay into a new work, but extracting that character from my work arrives at a character indistinguishable from Nintendo's.
I would not be violating Nintendo's copyright to license my video to Montendi, but Montendi would be violating Nintendo's copyright when they extract that character and use him in their own game.
It's fine, that doesn't change the legality. Unsure whether a judge would include reasoning like this in their judgement.
No, you are not freely allowed to create derivative works. You are probably arguing fair use or fair dealing, but Twitch streaming generally wouldn't count (it's not part of the list of exceptions).