Just because it is free does not mean it is free to distribute or free to sample and commercialize. Youtube most likely has something on their Terms and Conditions or EULA or whatever it's called.

From what I understand, unauthorized sample by any means is illegal. It doesn't matter if it was used to not make money, nor does it matter if the sample in question was 8% or lower length of its original source--it is illegal without permission.

But the unwritten rule here is that nobody really cares unless it is depriving them of money, which is very hard to prove. Not only that, the legal fees cost too much so the rights holders often let it go. Larger companies or individuals are much more likely to send a cease and desist order.

More or less sampling anything from anywhere without explicit permission from the content owner -- no matter how transformed or modified or short… is illegal.

That being said, if nobody knows or can identify the sample - nobody cares. Artists use uncleared samples all the time and there is definitely some risk involved especially if their track is going to be part of anything that is highly visible, like a commercial/TV/Film/Game etc. Usually there aren't lawsuits unless it becomes a really big track or it's used in some highly visible way.

If you're releasing a small record and you sample some snippet off of youtube, realistically probably nobody will care -- but that doesn't mean that it's legal or that the risk is zero… it's just low risk.

Do you think that Burial clears the Ray Jay or Beyonce samples that he transforms to make the vocal snippets in his masterful tunes? Absolutely not (it would be prohibitively expensive!) -- but his music is not mainstream enough or doesn't generate enough money where anybody is suing him (yet.) I think the current laws are pretty absurd, but that doesn't mean you can ignore them without taking on any risk.

I've been on both sides of it -- a lot of people sampled the vocals from my track Lies and then released/sold songs using the sample uncleared and without proper credit.. I had to spend a lot of time and effort to get the tracks taken down from Beatport/iTunes etc. So as a copyright owner it can be a pain too.  Bottom line the laws need to be reformed and less restrictive for artists and also easier to deal with as copyright owners!