Intellectual Property Law
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Fictional character names may be either copyrighted or trademarked, or even both. Which version of protection applies can be very confusing, but once such protection is obtained, then any use of that name, without the permission of the trademark owner, is a violation of federal trademark law and can make the user liable for profits and penalties to the owner. This article discusses the legal ability to copyright, trademark, and otherwise protect the name of a fictional character. If the party claiming ownership is the owner and controller under intellectual property law (trademark and/or copyright) then a failure to stop using their property, once told to, may bring about a lawsuit and, even using their property at all may allow them to file suit.
I cannot give you legal advice, only legal information. Be aware that any discussion or revelation of information regarding any number of sales made or not made can later be used in a legal case and may harm you, but so may not revealing anything. Any sales made during any period of time may make the situation worse due to the fact that sales would need to be repaid to the owner of any copyright or trademark item and, after receiving notice of the problem may make one liable for more penalties due to the knowing disregard of rights (if those rights do, in fact, exist). Ideally, you may want to speak with an attorney who can help you obtain an agreement from this "owner" to not pursue any further claims or actions against you and to just settle the matter now without any further liabilities or claims of action. To assure that is done correctly, and leaves no way for the "owner" to later pursue any claims an attorney hired by you should be used to ensure the legal langauge is binding and accurate.
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