That is just wrong. And I am sure she knows it. What most people do not realize is that not just the seller can get in trouble, the buyers can as well.
A few years ago I bought a design for my embroidery machine on cd. In her ad she said it was an original. And she had sold hundreds. I was new to machine embroidery and had never seen the design. Well, I got a letter, well over a year later, stating that I had purchased stolen property. WTH? I did not. The wanted me to go to TX and a bunch of other stuff or I could pay 300 bucks. So ridiculous. After some research I did find out that the demands were pretty much just as much a scam as the seller was pulling. I was still scared they would come after me, but they never did, thank goodness.
Donna Jean, you did right by turning her in and demanding a refund. That puts you in the clear if the owner of the pattern ever decides to prosecute.
When I first saw people selling the bags here I went over my Bow Tuck patterns, purchased at a LQS, and I could not find anywhere on it that says the pattern is copyrighted. I am sure that does not mean it isn't, and maybe the more recent ones do say that they are. I have no idea. Even so, I still think it is wrong to sell copies of an original pattern, unless it is your own.