Short answers, pulled from the story.
Bryan Konietzko saw the fan animation in 2013. This event occurred after the production of Avatar: The Last Airbender between 2005 and 2008. The digital artwork featured blinking characters and tinted backgrounds.
Fan art is technically a derivative work under 17 U.S.C. § 106. The right to reproduce and display artwork is strictly controlled by the original author. Courts apply the fair use exemption found in 17 U.S.C. § 107 to specific cases.
The Hugo Award for Best Fan Artist has been presented annually since 1967. This award recognizes original artwork created by fan artists in science fiction and fantasy genres. The tradition predates the modern internet era of derivative works.
Rule 34 is a pervasive idea that if something exists, there is pornography of it. This concept has found its most visible expression in the form of erotic fan art. The phenomenon represents a significant departure from traditional innocent depictions.
Fan art allows fans to present established characters in new situations or contexts that would never appear in the original work. This form of expression enables fans to explore deeper or alternate meanings about their favorite media. Artists can critique social issues and challenge stereotypes by placing characters in new contexts.