The potty guys are back in town. Potted Potter, a two-man comedy show that purports to retell all seven Harry Potter books in 70 minutes, has fetched up at the Panasonic Theatre on Toronto's Yonge Street for a holiday run – after it successfully used the same venue to launch an assault on North America in 2012.

The show originated as a bit of street theatre in London in 2005: actors Daniel Clarkson and Jefferson Turner first created it as a brief skit at the behest of a bookshop owner who wanted them to entertain the crowds lining up to buy book six, Harry Potter and the Half-Blood Prince. From there it went to the Edinburgh Fringe as a longer show, then to Toronto and New York, and Australia, Singapore and Dubai. The show has been so successful that Clarkson and Turner no longer appear as a Potter-mad know-it-all and his ignorant companion in the touring production now in Toronto, leaving the roles to two other pairs of actors.

Seen by multitudes, Potted Potter is testament to the resilience of Fringe comedy, to the power of the Potter brand – and to some unusually sensible attitudes toward copyright.

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The thing is, Potted Potter, advertised as "the unauthorized Potter experience" has no connection with J.K. Rowling and the Harry Potter books. Producer James Seabright says Rowling's management is aware of the show's existence – by this stage, they would be hard-pressed not to – but Potted Potter has had no other contact with the bestselling author, although the producers save a seat for her at every performance.

If you are in the business of running around stage wearing round glasses spouting stuff about horcruxes and quidditch, not hearing from Rowling is probably good news. It's not like Rowling has been hesitant to defend her copyright. In 2003, she successfully blocked foreign-language translations of the Russian Tanya Grotter books, a series initially inspired by Harry Potter and now only available in Russia. And she stopped publication of two Indian adaptations of Harry Potter and the Philosopher's Stone. In 2008, lawyers for Rowling and Warner Bros., the studio behind the Harry Potter movies, won a suit against an American fan who was attempting to publish in book form an index of her characters that he had started as a website. That same year Warner told a British cook who was inviting paying guests into her home for a Halloween meal that included pumpkin pasties and butterbeer to stop calling it a Harry Potter evening.

But Potted Potter is a parody – it is also subtitled "a parody by Dan and Jeff" – and that is a category often argued to be a "fair use" of copyright material because it might be criticism, one of the specific instances where one is permitted to borrow without falling foul of the law. Until recently, parody was not specifically mentioned in either British or Canadian copyright law and, had Rowling sued, it would have been up to a court to decide whether Potted Potter infringed.

Seabright has speculated that Rowling must understand the show comes from a place of great affection, but the index of characters also came from a place of affection and that didn't save it. A prominent American legal definition of parody and satire from 1994 – the one mocks the original material; the other uses the original material to mock something else – makes it clear that affection is not the defining characteristic here. Rowling might have had a case against Potted Potter – Dmitri Yemets, the author of the Tanya Grotter books, unsuccessfully argued his project was parody – but there are also other examples where parody has been judged not to infringe.

By 2014, this has all become a bit moot. As music mash-ups and TV parodies proliferate on YouTube, some countries have decided its time to spell it out: Canada added parody and satire to its examples of fair use in the new copyright law in 2012 while Britain just this year decided to adopt the European Union law that includes parody as a fair use. If the potty guys were once performing in a grey area where Rowling might have sued, today they are on firmer ground.

The truth is that while Clarkson and Turner have made their reputations off the characters Rowling created, they are also adding a significant artistic component of their own. There is a modicum of borrowed Potter plot and character in the show and a large dose of silliness at the expense of Potter plot and character.

The unmolested persistence of Potted Potter is evidence of something so often missing in copyright debates: a sensible middle ground. On the one hand you have the copyright dragons in the giant entertainment conglomerates suing school children and on the other you have downtrodden artists who can't make a living because the public is so determined it isn't going to pay for anything. Fights over copyright make many people, from Warner to the teen who's watching a torrent of a Warner movie, look bad. Meanwhile, Potted Potter makes Clarkson, Turner and Rowling look good.