They are insane. Why not giving permision of using a simple photo?
I am not sure where you are coming from here.
The original author of the photograph seemingly makes a living from travelling around taking/compiling photographs of interesting items/textures and selling those on to interested parties. I am sure she would also claim it was her keen artistic eye and camera skills that made it as good as it was as well -- could be tricky if that dentist case I mentioned above* is anything to go by but it would almost certainly be part of the claim. Even now, never mind back then, having a pro do things can make all the difference; you taking a picture of your table for wood grain on a phone is probably going to come out nowhere near as nice as me finding a choice piece of burl and taking a photo in a light box with my DSLR and fancy lens before doing all the colour correction, and maybe even making it seamless (though that would be a further work).
As your code slaves need to be spending their days coding and not going to was it a random mansion somewhere to take the perfect pictures of broken glass (never mind the thousand other images they might not even know about/ever otherwise encounter that look cool) you see art based companies choose to buy in such texture packs instead, in this case it appears you can have the work to look at for one price but going on to use it in a commercial/further work required a further round of negotiations (common enough back then and to this day -- the obvious start would be creative commons where you can vary whether you require attribution, allow remixing or other things
https://creativecommons.org/about/cclicenses/ but you can also see things like stock photography only allowing works in positive stories or something).
Capcom appear to, or at least the photograph author/owner claim that Capcom, have not done the further negotiations and just used it, maybe never expecting the original author to find out (and it is quite changed from the original) or maybe just not doing their job and neglecting to clear the image. Ignoring copyright vs negligence maybe changing how much money they pay -- if the discovery/disclosure process reveals a Capcom exec saying "nah just use it as they will never find out" then that is going to be a very bad day for them vs it maybe slipping through the cracks, or maybe some third party art house having done the deed, where there is more leeway for things.
This is all a bit different from many other copyright cases we normally see in games, youtube copyright claims, hacking things and whatever else we normally discuss as it pertains to copyright around here but it is still a fairly established part of the law (above I mentioned a lot of music cases in the 80s and 90s where samples**, this being very much akin to music samples, were used).
Most of the big filing document was then establishing her as the owner, the general business setup being established when Capcom was doing their thing back when, dodging the claim that Capcom could have made it independently (private mansion in America or whatever it was) in addition to it lining up too perfectly with the stuff in the logos for someone else even standing at similar angle and the leaks from Capcom showing them using similar file names to what she made. 12 million seems a bit large for such a claim, even if said Capcom exec was rubbing their hands together in an evil manner whilst writing the email, but it is likely done to raise the counter offer from "we will pay your fee in retrospect and a bit more to say sorry" to something more like "even after lawyer fees then might even be able to retire on this if I do it right".
*short version was a dentist restored someone's teeth. Took before and after photos. Used them on his website or something as advertising (look at my work and all that). A competitor took the after photo and used it on their banner or something. However it was ultimately ruled, and at fairly high level, the original one that did the work and took the photo did not have a copyright claim as the original work did not meet the standard for a creative work (what you need for copyright) i.e. it is just a picture of teeth and we all know what they look like. I can see something similar happening here; spiderweb cracking of a piece of glass is part of physics really (engineers and forensics will know to look for it and analyse it to determine how something failed it is that fundamental) and if it is found in a random mansion somewhere then not like she broke 1000 sheets of glass to get the best one, and edited the image to be perfect. Capcom's use of it also did not mean she could not continue to sell the work (see usurpation of the market part of copyright claims) but that is probably a different matter and samples/stock photos in general is fairly clear here anyway.
From where I sit it would be a massive change in the stock photography world if it was ruled as not copyrightable material but stranger things have happened.
**marginally related at this point but one of my absolute favourite videos on the topic in general (nobody I have ever shown this to has not sat through to the end) so I am going it. History of the amen break (a sound I can almost guarantee you know but probably never knew the story of).
