Yes. Being a sequel or using the other assets, in either case, you are making a derivative work. Without a license, you infringe on the right holder's exclusive right to make or license derivative works:
- A sequel is usually a classic case of "how the story unfolds further". See Anderson v. Stallone, where the author of an unlicensed sequel script was struck down.
- A modification of the original game - aka Mod - uses the assets or parts of them. Modding is often contentious, sometimes it is encouraged.
Usually, when you install a game, you agree to a EULA that dictates what you can or can't do - so there is the real possibility you violate a contract if you step out of that contract. Some game smithies are modder-friendly and encourage it, as a mod community keeps a game relevant longer. Bethesda for example hands out a modification package for Skyrim and other titles, but it also provides a separate EULA what you can and can't do with these modification-tools.
Many games however don't provide a modding pack and have a EULA that explicitly bans users from making modifications or derivative works. As a result, there have been cases against modders, and there are a lot of C&D letters sent out to modders that use assets of games. So there is a high chance that litigation for violation of the contract or copyright infringement can be started.
A rather high-profile case that ended somewhat recently was the "Red Dead Redemption Visual Enhancement Mod". Take-Two sent a modder a C&D, filed suit, and then the parties had arbitration. The arbitration result contains a clause that forbids the author of the mod to ever create any derivative work (aka: mod) for a Take-Two or Rockstar game again. The C&D (as well as the case and leverage in arbitration) hinged on a violation of the Rockstar EULA License Condition i, which bans any modifications wholesale:
You agree not to, and not to provide guidance or instruction to any other individual or entity on how to:
i [...] display, perform, prepare derivative works based on, or otherwise modify the Software, in whole or in part;)
I'm interested in knowing if loading the textures from the other game's folder infringes on the copyright for the textures, despite them technically not being included in the program.
– user34913 Oct 16 '20 at 09:16