Speaking as someone who has been through this particular wringer before, I feel for the guy. Even if I don't buy into his particular form of "theft" art.
Details of the AP attack here—To make a long story short, "We own the photo that Fairey used, ergo Fairey owes us moolah."
May the best lawyers win! (Considering who Shepherd Fairey is, and how much money he's generated over the years, I'm sure he's got much more than a sporting chance.)
Previously: Red-on-red excitement, as Fairey is accused by art critics of "appropriating" (by which they mean: lifting) historical leftist art.
Update: Bob Owens points out that the case is not as clearly "fair use" as one would suspect.
Cue: D'ohbama picture?
Update: A defense of Shepherd Fairey, written by my good friend Peter Friedman.
Update: Allah weighs in.