I'm going to guess the likely answer is no, but I'm interested to know more. So let's say I have an image of James Bond from Goldeneye.
Then let's say I run it through ASCII art generator such as this http://picascii.com/ and it produces the following ASCII code made for the web as such (can't post here but here is a JSFiddle of the generated code).
https://jsfiddle.net/caimen/ope1j9w0/
Why or why would I not be allowed to use this version of a copyrighted image in my game?
The reason is 17 USC 106:
the owner of copyright under this title has the exclusive rights to do and to authorize any of the following...
(2) to prepare derivative works based upon the copyrighted work
The original picture is the underlying protected work. The ASCII reproduction is a derivative work. If you get permission to make the derivative work, it is okay. Otherwise, it is copyright infringement. There is an escape clause, "fair use", which amounts to taking a chance that you won't be sued and then arguing that you didn't do them any prohibited harm. If you make any money off of the game, you have a major strike against you. I suggest reading the fair use FAQ; basically, it is really hard to know how a fair use defense will fare, but based on prior cases, I'd say it's infringement, not fair use.
