I have designed a crocheted blanket that features pixel-by-pixel images of characters from the original Super Mario Bros. game. Since the pattern itself--that is, the way the images are arranged in space, and the way the stitches are created--is entirely my own design, can I sell it? Or am I liable to be sued by Nintendo for the representations of copyrighted characters? There are several similar products that I've observed for sale online...
Anybody who uses copyrighted images that belong to someone else, or in this case, uses trademarks and characters that belong to someone else, infringes on the rightsholders' rights and is likely to get sued (or asked to "cease and desist" by a lawyer) sooner or later, and have to disgorge their profits and perhaps a great deal more. Anyone who's selling products like this online just hasn't been caught yet, and just because other people are violating the tights of others and risking being sued, doesn't make it right and doesn't make it a good idea for you to do it.
Only the IP rightsholder has the right to exploit their work and has the right to create new "derivative works" based on their original work, so it doesn't matter that your design is entirely "original," since you want to use famous characters that someone else has spent time and money making famous. You only want to use these famous characters because that's what draws buyers to buy your products, right? And if Nintendo makes or wants to make blankets, you're in competition with them and taking their customers, who may be confused about the source of your blankets. That's the essence of trademark infringement - consumer confusion, which also relates to the idea behind unfair competition.
You need to create your own designs of your own characters, trademark them for the types of products you want to make, and make these characters famous enough to compete with Nintendo's.
Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on, since each state has different laws, each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship.
Not lawfully. You cannot reproduce or distribute your version of the Mario Brothers characters -- even if you arrange them in some novel way -- on any medium, be it a blanket or other fabric or paper or whatever it is that you use to capture your designs.
Your additional information poses the question: The pattern itself took nearly two months to write--am I not entitled to charge for time invested? Would it be okay to post the pattern for free saying that donations are welcome?
Response: Just by publishing on the internet the patterns that you've created of the Mario Brothers' characters infringes their copyright -- distributing them to others [for a fee or free] is a further, and far more egregious, infringement.
You apparently believe that what you've done is lawful because (1) it took you a long time to create your infringing patterns and (2) lots of other people are infringing as well. Hmm. I hope you understand how silly those rationalizations sound. No, you cannot lawfully publish or distribute your patterns w/o a license from the owner of the copyright in the Mario Brothers' character. You need to put your creative talents to work creating your own designs. Good luck.
