Note that Ludlow Music was the one doing this - not the heirs of Woody Guthrie. In fact, the heirs (Arlo "Alice's Resturant" Guthrie and the rest) thought the jibjab piece was pretty darned amusing and said so. And even Woody had a quote encouraging people to use it (which makes sense, given his folk roots), saying:
"This song is copyrighted in U.S., under Seal of Copyright #154085, for a period of 28 years, and anybody caught singin it without our permission, will be mighty good friends of ourn, cause we don't give a dern. Publish it. Write it. Sing it. Swing to it. Yodel it. We wrote it, that's all we wanted to do."
So Jibjab in turn fought back, and engaged the services of the Electronic Freedom Foundation, a group that I think well of since they arose out of the secret service raid on Steve Jackson Games. The EFF launched in, and strongly argued that it was fair use. Moreover, during the discovery phase, they came up with the fact that Woody Guthrie had the song copyrighted 11 years earlier than Ludlow claimed. Which means the timer has run out and the song is officially in the Public Domain (along with the Star Spangled Banner and Beethoven's Fifth, but not, alas, Happy Birthday).
So a settlement is reached, the suits are dropped, and Jibjab gets to keep using it (now they need to do a sequel - "This Mess is Your Mess"). Happy ending to the story, right?
However, the business-friendly AP reports something a little bit different, spinning the tale in the direction of the publisher . In this version of reality, Ludlow grants the right to use the material, if Jibjab donates 20% of any profits to the Woody Guthrie Foundation (which is a nice idea anyway - though the profits on a web-distributed flash animation are likely minimal). No mention is made of the fact that Ludlow may not own the song at all, and makes it sound like the company triumphed when in fact everything blew up in their legal faces, and their control over the song is now weaker than when they decided to freak out in the first place. However, in the meantime they can claim ownership in order to rattle their legal sabers at others, and hopefully grabbing a buck or two for granting rights they may not own.
However, it is clear that this song is your song. And I'm kinda enamored with the idea of making it our national anthem, now that it’s in the Public Domain.