What happens if a user uses a copyright image as a profile image on SO or any other site?
Is it ok to use such images because according to law it is illegal to use anything which has a copyright?
My question is just related with User Profiles on SO not other social media sites.
If a copyright issue is occurred then who is responsible for it?
Short answer: You should not have an avatar with copyrighted content.
Long answer
According to the Stack Exchange TOS all Subscriber Content must be irrevocably licensed to Stack Exchange under the Creative Commons Attribution Share Alike license. This requires us as members to have the right to give them such a license.
If a copyright issue occurs, normally the real copyright holder will send a DMCA takedown notice (an e-mail) to Stack Exchange and they presumably will remove your avatar. You are the one who originally pirated the image so you are still personally responsible and can be held accountable for the violation. Stack Exchange is probably also responsible, but only so far as neglect goes (which is not that far if they act upon all requests from rights holders), but they can then in turn hold you as a member responsible for paying their fees arising from your copyright violation.
The TOS even covers this in detail:
Subscriber represents, warrants and agrees that it will not contribute any Subscriber Content that (a) infringes, violates or otherwise interferes with any copyright or trademark of another party
...
Subscriber will indemnify and hold Stack Exchange, ..., harmless, including costs and attorneys' fees, from any claim or demand made by any third party due to or arising out of Subscriber’s access to the Network, use of the Services, the violation of this Agreement by Subscriber, or the infringement by Subscriber, or any third party using the Subscriber's account, of any intellectual property or other right of any person or entity.
"All materials displayed or performed on the Network, including, but not limited to text, graphics, logos, tools, photographs, images, illustrations, software or source code, audio and video, and animations (collectively, “Content”) (other than Content posted by Subscriber (“Subscriber Content”)) are the property of Stack Exchange and/or third parties and are protected by United States and international copyright laws.". Profile Content seems to just be a subset.
Commented
Apr 20, 2016 at 12:33
This has been partially clarified, and perhaps modified, by recent changes in the terms of service (emphasis mine):
Profile Content is information about you (a Subscriber) that is contributed by you or inferred about you by your activity. Profile Content includes, but is not limited to, display names, reputation scores, avatars, your role and company, and other user generated content found on a Subscriber's profile such as "About Me" content.
Profile Content that is available via the Stack Exchange API ("API Profile Content") is perpetually and irrevocably licensed to Stack Exchange and its Subscribers under the Creative Commons Attribution Share Alike license
Profile Content that is NOT available via the Stack Exchange API ("Personal Profile Content") cannot be used for any commercial purpose, individually or in aggregate, or be republished without the explicit consent of the author of such Personal Profile Content or the explicit consent of Stack Exchange.
Methods that return user objects provide a URL to the avatar in the profile_image field, but they do not return the profile image itself. That makes the image “Profile Content that is NOT available via the Stack Exchange API”, and is thus not automatically licensed under CC BY-SA. In particular, using an image as your avatar does not grant others the right to redistribute it.
