I use to sell custom children's clothing on the big auction site. It is not illegal to use licensed fabrics in your items. There is a woman that has sued Nascar, Disney etc and won. tabberone I think is her website. It has to do with the first sale doctrine:
"The whole point of the first sale doctrine is that once the copyright owner places a copyrighted item in the stream of commerce by selling it, he has exhausted his exclusive statutory right to control its distribution."
Justice Stevens, delivering an opinion for a unanimous Supreme Court in the case QUALITY KING DISTRIBUTORS, INC. v. L'ANZA RESEARCH INT'L, INC. (96-1470), 98 F.3d 1109, reversed.