I've seen it argued on HN that the GPL's definition of a derivative work differs from the legal definition, and if you never distribute the GPL'd code, you aren't bound by it.

Thus, one could write kernel drivers, which (it was argued) are not derivative works under copyright, and be safe as long as the kernel is not redistributed by the same entity.

In theory that would not be copyright infringement as you describe it, since the entity that would be accused never distributed the GPL'ed licensed work.

There is however a big caveat whenever you try to "hack" around law. If the author explicit state that "I do not wish X to happen to my work" and someone technically comply but in practice make so X happens anyway, then a judges ruling can go anywhere. See the Pirate Bay or the Aereo case where arguments for such "hacks" has been made.

The GPL does say the conditions are only on redistribution. But I think that's how it works with other derived works as well, by default. The GPL is all about how you can relicense it to other people using only the same license, you're free to do whatever you want if you never give anyone your modified code.

17 USC §106 refers to the right "to prepare derivative works" as an exclusive right of a copyright holder, so creating the derivative work in the first place could be a copyright infringement under U.S. copyright law even if it is never distributed to anyone. So you can potentially infringe copyright in your basement by making a fan translation of some movie or novel into your language.

The first time the GPL mentions "derivative work" is in paragraph 0, in the phrase "derivative work under copyright law", which would suggest that they are not redefining it. However, it immidietly goes on to say:

"that is to say, a work containing the Program or a portion of it, either verbatim or with modifications and/or translated into another language"

I'm not entirely sure what to do with this.

It means the definition under copyright in addition to translations and modified versions. Different countries have different copyright definitions, and the translation of a work is not always the same CC.