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A federal appeals court on Wednesday ruled that the rock band Green Day had not infringed the rights of the illustrator and street artist Dereck Seltzer when it incorporated his artwork “Scream Icon” without permission in a video backdrop at its concerts during its 2009 21st Century Breakdown tour.

The United States Court of Appeals for the Ninth Circuit, in California, said the use of the image was an example of “fair use.”

Scream Icon – a black-and-white image from 2003 that depicts the contorted face of a shrieking woman — was used during the Green Day song “East Jesus Nowhere,” spray-painted over with a large red crucifix.

The video version had been adapted from a photograph of a tattered copy of Mr. Seltzer’s work posted on a brick wall on a corner of Sunset Boulevard in Los Angeles.

As well as the addition of the red cross, the contrast and color of the work was altered in the video and black streaks were added down the right side of the woman’s face, the court said, but Scream Icon was still clearly identifiable throughout the roughly four-minute video.

Mr. Seltzer complained, and then after the band apparently offered him concert tickets as settlement, he sued in 2010.

But a year later, a federal district judge in Los Angeles rejected his claims of copyright infringement and violations of the Lanham Act, a 1946 federal law that prohibits trademark infringement and false advertising. On Thursday, the appeals court affirmed that earlier decision.

“The purpose and character of the use was transformative and not overly commercial,” wrote Judge Diarmuid F. O’Scannlain in the opinion for the court’s three-judge panel.

“With the spray-painted cross, in the context of a song about the hypocrisy of religion, surrounded by religious iconography,” the judge added, the video backdrop using Scream Icon conveys “new information, new aesthetics, new insights and understandings” that were distinct from the original piece.

However, the court overturned the award of legal fees to the band of $201,012.

Even though Mr. Seltzer had lost his challenge, he had not been “objectively unreasonable” in suing, the court decided.