There is some controversy over the question of whether items made from licensed fabric can be sold. Many crafters do make and sell items from licensed fabric, but when fabric manufacturers find out, they send legal warnings to crafters.
What is Licensed Fabric
Fabric imprinted with trademarked images is referred to as licensed fabric. In fact, the fabric manufacturer has purchased a license from the trademark holder to print the fabric. The images on the fabric are licensed, but the fabric itself is sold, not licensed.
What Fabric Manufacturers Say
Most licensed fabric has a warning printed on the selvage stating that the fabric is intended for home use only and items made from the fabric cannot be sold. Trademark holders and fabric manufacturers have argued that this warning constitutes an agreement with the purchaser, and that selling items made from the fabric is illegal. Trademark holders have argued that items made from such fabric constitute a "derivative work."
What Crafters Say
Many crafters believe that items made from licensed fabric should be allowed to be sold, but most are easily intimidated by cease and desist letters from trademark holders. Instead of trying to fight a giant company with a dedicated legal department, crafters stop selling the items in question or try to keep a lower profile.
What the Courts Say
The most relevant court case to date has been Precious Moments v. La Infantil Inc., 971 F. Supp. 66 (1997). The federal judge ruled that the doctrine of first sale made it legal for La Infantil to produce bedding from fabrics containing licensed Precious Moments images. The court also ruled that La Infantil should add a disclaimer to their bedding making it clear that the bedding was not produced by the Precious Moments company.
Other Relevant Court Cases
In Lee v. A.R.T. Co., 125 F.3d 580 (7th Cir. 1997), the judge ruled that wall-hangings made from copyrighted cards were not derivative works. In Scarves By Vera, Inc. v. American Handbags, Inc., 188 F . Supp. 255 (S.D.N.Y. 1960), the judge ruled that American Handbags could produce bags made from Vera's scarves and containing her logo as long as they had a disclaimer explaining that the bags were not affiliated with Scarves By Vera, Inc.
How Can Crafters Protect Themselves?
When selling an item made from licensed fabric, make it very clear that the item was made using licensed fabric but that the crafter is not affiliated with the trademark holder. Especially when selling on eBay or Etsy, be prepared to have your items questioned and even removed. Even though the law is on your side, common perception is not, so if you're not willing to fight to prove that you have a right to sell items made from licensed fabric, it might be easiest to avoid the issue altogether.
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