Quick primer for those new to the topic:
copyright: “the legal right to be the only one to reproduce, publish, and sell a book, musical recording, etc., for a certain period of time” This is a legal concept, and when you “infringe copyright” you are breaking a written contract that affords one person (or select people) the right to reproduce and publish.
plagiarism: “Plagiarism is theft of another person’s writings or ideas. Generally, it occurs when someone steals expressions from another author’s composition and makes them appear to be his own work.” It’s not a legal term, and isn’t, in itself, illegal. However, plagiarism does contribute to the argument of copyright cases.
If the mural in question was unauthorized (by the owner of the building), then it’s highly unlikely that there’s any true copyright attached to it (they’re claiming they have the same protection all artists have - it hasn’t gone that way in the past). However, this use - with the included direct misrepresentation - may result in a win for the artists. Blatant plagiarism can alter the outcome of a copyright case. It really just depends on how strong their argument is. See this article for more info.
Seems like he transformed the medium at least. That’s something. Did we jump down Andy Worhol’s throat for “stealing” Cambell’s soup labels and selling them as art?
Yes, a great many critics did. Borrowing, stealing, homage, derivative works - there’s no simple ethical formula in the art world, and battles can rage for centuries.
I used to live right by that work at 9th and Mission in SF, I loved that piece:
But then some high end fashionistas came in and took a dump on it 
If legal action was launched, I suspect the result would be an out-of-court settlement. Although there doesn’t appear to be solid case law on point, there is a history of settlements in the rare occasions when graffiti artists bring claims of infringement. This isn’t surprising, since the statutory language of copyright doesn’t require that the author own the physical media in which their expression is fixed, nor does ownership of the media grant ownership of the copyright. This law review article has a pretty good argument for why there probably is copyright in the sort of highly expressive graffiti ripped-off here.
(though the article doesn’t mention it, the claim was settled and the book was pulled)
http://hyperallergic.com/36016/cali-killa-urban-outfitters/
(settled)
http://wheels.blogs.nytimes.com/2011/12/02/graffiti-muralists-reach-settlement-in-case-of-contentious-fiat-500-commercial/
(settled, though it’s not clear if the graffiti itself was unauthorized)
I’m not aware of any copyright cases where analysis has turned on whether there was plagiarism, although misrepresentation before the court is certainly harmful.
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