Can you make things that look like copyrighted characters and sell them on Etsy? My friend is making really cool Oscar the Grouch hats, but could she can get in trouble for selling them?
As a general rule, you shouldn’t sell crafts with any character, image or logo that’s not your own. Etsy can and will remove items or ban you for selling work that infringes on others’ intellectual property rights — that includes copyrights, trademarks and patents. So that includes Oscar the Grouch’s face, the Steelers’ logo, the Nike swoosh, a Jeff Koons sculpture, and on and on.
In some cases, companies even restrict the commercial use of fabric or stamps they create. You’ll often see “for private/personal use only” printed on the selvage of fabric. If you want to use commercially produced supplies in the crafts you sell, you should check for the company’s angel policy first. For example, here’s the angel policy page for EKSuccess, which is very specific about the procedure to follow if you want to sell items made with anything they produce.
Aside from the fact that Etsy can take your items down or ban you entirely for selling items with copyrighted or unlicensed images, it’s better for business to make and sell only originals anyway. By creating your own images, patterns or characters, you can establish a visual brand for yourself that’s unique and recognizable.
Instead of making plushies in the image of Sesame Street characters, create your own lovable monsters. Rather than buying commercially printed fabric, create your own patterns and designs on Spoonflower. Instead of using stamps someone else made, carve your own! When in doubt, DIY.
Caveat: I’m not a lawyer. But the folks over at the Art Law Center are.
Got a craft business question for me? Post it on Facebook or Twitter, and I might answer it here!
grace dobush 
Just curious, I looked up Sesame Street in Etsy and there were several items that were “handmade”. Does that mean these people have had some sort of “permission” via a license?
More than likely, those items just haven’t been flagged yet! Also, some companies are more litigious than others.
Thank you for the great post! I have just started a craft microbusiness and am trying to learn everything I can about the business side of crafting. Appreciate the information! Mary
Amen to this! And how about the idea that in creating your own “intellectual property” you’re just ripping off someone else’s intellectual property. And the only reason someone is buying the thing is because it’s the character their kid is in love with. In short, come up with your own stuff people.
Esty does NOT take down ads selling copyrighted items I know that they are allowing dozens of sites to sell copyrighted patterns out of books to customer. So You need to recheck that and listen to their bull about why they have not taken those patterns down. they are making money them selves off of these peoples ads so why should they.