Comment 1 for bug 1591513

After some experimentation I've found that with no 'linux-image-extra-virtual' package installed (whether it's installed or not makes no difference) and all other package versions at the same level the command does work when the backing store is specified as 'overlayfs' instead of 'overlay'.

root@lxchost-xenial3:~# lxc-copy --name=cache --newname overlayfs1 -B overlayfs --snapshot
root@lxchost-xenial3:~# grep rootfs /var/lib/lxc/overlayfs1/config
lxc.rootfs = overlayfs:/var/lib/lxc/cache/rootfs:/var/lib/lxc/overlayfs1/delta0
lxc.rootfs.backend = overlayfs
root@lxchost-xenial3:~# grep overlay /proc/filesystems
nodev overlayfs
nodev overlay
root@lxchost-xenial3:~# lxc-copy --name=cache --newname overlayfs2 -B overlay --snapshot
lxc-copy: bdev/bdev.c: bdev_copy: 381 no such block device type: overlay
lxc-copy: lxccontainer.c: copy_storage: 2844 Error copying storage.
clone failed

So it would appear that the backing store is supported, but the man page and the tooling do not match in functionality.