copyright infringement, use of film images on personal website

They would have to argue that the use was a "fair use" and were doing it for parody. Of course, the end user, the person buying the face in hole picture would not likely be targeted, it would be the website that was making profit off of the image. The photographers who took the image; the distributors who have the license for the image and the artist portrayed in the image have rights to the image which are not being protected by this site. But the "parody" defense and the likelihood that there will be no confusion as to the lack of legitimacy of the image probably make it difficult for any of thecopyright holders to bring action.

The laws in Britain afecting intellectual property are not the same as those in the US. There are major differences. Consult with someone who practices where you intend to adopt this stunt.

If we assume that faceinthehole.com has not licensed the rights to reproduce, publish, and distribute the template photographs -- and to create other works based on the template photographs -- from the people who own the copyright in those photographs (a reasonable assumption), then the short answer under US law is that copying onto a computer or printing out a photograph from faceinthehole.com is very, very likely an infringement of the copyright in the template photograph.

Can a faceinthehole.com user make "fair use" of the photograph so that he or she is not obligated to pay the copyright owner for that use? Under US law I see no basis for any such "fair use."

But, at the end of the day, would any of the copyright owners ever sue a faceinthehole.com user? Highly unlikely -- especially if the copyright owner is a US resident and the user resides outside the US. There are a bazillion copyright infringements that fall "below the radar" because the negative consequences of the copying are either non-existent or negligible. These are, technically, infringements but the "wrong" is so de minimus that neither the copyright owner nor a court would afford those infringements any time to address them.

A better question is whether any of the owners of the copyrights in the photographs would sue faceinthehole.com. I think the answer to that question is maybe (a safe, lawyerly answer). But that risk should not matter too much to the users of the faceinthehole.com service.

Disclaimer: My analysis is only an academic exercise that, with more facts and time, could very likely change. The above is not intended to be legal advice and cannot be relied upon as a basis for taking action or refraining from taking any action.