You don't even have to be using the fabric to make anything to be the recipient of a cease and desist order!
(I should preface this by saying that I manage a quilt shop, but came into the business via the craft show route. So I have both made items from fabric, as well as simply selling the fabric.)
A few years back every fabric manufacturer had a "Red Hat" collection. (These were not licensed fabrics, just groups that included red hat motifs.) But none of the makers dared name their collections "Red Hat" aanything. Marcus did, for a time, call theirs "Red Hat" but then they renamed it "Hats and Heels". Other companies named their lines "Fifty Plus", "Ladies who Lunch", "Accessorize" and so on. My shop carried many of these lines.
You can imagine my surprise when I received a cease-and-desist letter from one of the two Red Hat groups (I can't remember if it was the Red Hat Ladies or the Red Hat Society.) They were alleging trademark infringement because I had described the fabrics using the words "red hat". Now, seriously, what was I supposed to do? Say, "oh, we have this fabric, and it is purple, and it has hats on it and by the way they're red"?
That was the year I learned about Trademark law. At the time, both of the two "red hat" groups had been issued trademarks, but only as a social group, not for any types of merchandise at all. So they really had no legal leg to stand on, so to speak. And I worried, but ignored the letter.
Well, then I got a middle-of-the-night e-mail from the OTHER red hat group. Actually, from someone who claimed to be the founder of the group. Same thing, a cease-and-desist letter. But... if you do the math, she would have had to be fifty when she started the group, and this was many decades later, putting her somewhere in her mid-80's, at least. And I know that lots of people are bothered by insomnia at that age, but somehow I just can't imagine that they pass the hours at night by sending out scary e-mails full of "legalese"! So I worried but ignored this too.
Now Northcott has reprinted a few of their red hat group, "Red Hot Mamas". So now, to head off any troubles, we include this disclaimer on our website: "Please note that we are not affiliated in any way with the Red Hat Society or the Red Hat Ladies, and this is not an officially licensed product from either of those associations."
As to making items from licensed fabrics: I would definitely include a similar disclaimer, in the item description or on the hang tag if you're selling at craft shows/stores.
There's some interesting reading available on this website:
http://www.tabberone.com/ Warning: some of it is quite "acidic"!
And, by the way, I don't harbor any ill feelings against either of the Red Hat groups.