This is exactly why things like 'positive rights' where the government is required to be in your life (as opposed to our current system of 'negative rights' which limits the government from your life) should be avoided at all costs. Laws like this stifle creativity in a post-modern culture where most art takes elements from other sources and blends them together to change their tone/meaning, force the original piece on it's proverbial head, or make a point about the subject. This would effect a wide range of media from AMVs to documentarys, to even home videos if a blocked piece of art or a sound track enters the frame.
For another example, how many people watch 'unboxing' videos as part of their product research before purchasing/suggesting a product to someone? Every product has copyrighted artwork on it. If a company wanted to they could pull your video review or take down the site that hosts it, imposing fines. In a would where online purchasing is the only way to go, I find such things to be invaluable in my decision-making process and would hate to see them relegated to only 'professional' sources which may gloss over flaws in the product.
I am all about protecting artists, and I find the piracy that goes on to be completely unethical and immoral (especially when music/movies are so cheap!), but this is not the way to do things. Our current laws where someone has to send a cease and desist notification, and allow time for such notification to be adhered to is just fine for protecting a content creator's rights (and if ignored the artist should be able to sue the pants off of the offenders!).
The internet is a wonderful place. Lets not let stupid people ruin it.