Elves are ubiquitous. It would have to be extremely unusual to fall under any copyright protection after you have made significant changes. However, if it still looks a whole lot like a specific, recognizable elf, say from a movie or children's book, then you'd need to be careful, but seriously, think about some of the elves that are commonly seen. Is the Elf on the Shelf recognizably different from elves we used to see on Christmas ornaments and cards in the 1950's? I don't see how! Is there a significant difference between him and say, a Keebler elf for that matter? Maybe Keebler needs to sue whoever came up with Elf on the Shelf? How about Snap, Crackle and Pop? Google "elf" images and see if there's anything that makes yours seem too much like some other and then be sure to change that. They seem to be a very standard cultural icon. You wouldn't worry about duplicating someone else's work if you were creating a Santa figure, and he's just another kind of elf, imo. (I'm not a lawyer.)