Crafting and Copyright - Can I Sell Finished Pieces?

One of the issues that has come up in the past few days is how intellectual property issues can potentially affect your cross stitching hobby.  The issue is that patterns are considered copyrighted designs, and if you sell pieces made from patterns, in some cases, it could be construed as copyright or trademark infringement.  I sell my completed pieces on Etsy, and I was approached by another member saying that I should verify that I was not violating any laws by listing those pieces, so I did some homework.  Now, I am not a lawyer, but I did speak with one (my fiancé) regarding these issues, and I looked at several websites, including designer Teresa Wentzler's own copyright page, Crafts and Copyrights, and Yarn Tree's copyright page to find some answers for my readers.

Trademark versus Copyright
First, you have to determine if your piece is trademarked as well as copyrighted.  A book of cross stitch patterns of cats is copyrighted, but a book of cross stitch patterns of Garfield is copyrighted AND trademarked.  A copyright generally applies to a piece of art (a book, song, or textile art pattern), whereas a trademark generally applies to a commercial brand or line of merchandise (a line of T-shirts featuring Mickey Mouse).  Based on what I have seen regarding derivative works (art inspired by trademarked or copyrighted materials, including finished cross stitch pieces), if you sell something that features a trademarked character, you could be opening yourself to legal action.  I have heard of people being contacted by lawyers for selling girls' dresses made of Disney-printed fabric, for example.  I am a little fuzzier on these details because I choose not to stitch trademarked characters out of personal preferences, and I have heard conflicting statements concerning the legality of this topic.  If you are considering selling finished items featuring trademarked characters, you may want to speak with an intellectual property lawyer first.

So, assuming you are stitching something non-trademarked, what limitations must you observe?

1. No copying the pattern for re-distribution.  This is probably obvious but bears mention.  You are allowed to make one working copy to enlarge a detailed pattern or to mark up the pattern, but you cannot distribute the pattern to anyone else.
2. If you stitch the piece and sell it, you must buy a new pattern for each piece you sell.  Technically, copyright would prevent a crafter from selling a finished piece made from a copyrighted pattern, but practically, nobody is going to hunt you down for only listing one copy (ever) for sale.  An exception to this is Dimensions (part of EKSuccess Brands), which grants crafters permission to produce limited (~50 pieces) copies of their projects for distribution over a limited geographic area, provided the crafters request permission through EKSuccess's Angel Policy prior to sale.  I do stitch a lot of Dimensions products, but I have never stitched more than one copy from a single pattern, so I can't really say anything else about their Angel Policy.  Another exception is Teresa Wentzler's list of free patterns, which she explicitly states can be stitched more than once, although the charts (and, I presume, multiple copies of the finished pieces) cannot be sold.
3. You are also not allowed to take a copyrighted pattern, modify it, and pass it on as your own original work.  The new pattern would then be considered a derivative work, but you are not granted permission to create this type of derivative work from a copyrighted cross stitch pattern (conversely, you ARE permitted to use the original pattern to create an identical finished piece).

What is the absolute safest way to avoid copyright infringment?  Why, create your own designs, of course!  It may take a little longer and require some creative inspiration, but you are free to sell the pattern and the finished piece(s) as many times as you like.  There are many computer programs available for download that can help you - personally, I like KG-Chart, but there are several others.  You can either create sampler-style patterns, or you can convert original photography to portrait-style charts if you are a shutterbug.

Does anyone else have any experience with crafting and copyright?