I know it's illegal to sell cakes with pictures of characters put onto them due to trademarks. However, is it also illegal to sell a cake that has plastic figurines set on it (like Disney Princesses), or is that OK b/c you've bought a product from Disney? TIA
If you hand draw the image I can't see it being illegal so to speak... but I may be wrong.. But also if it's an edible image and it's purchased from the store bakery or a store online that sells them... then you are paying for the use of that item... I don't think there is anything wrong with the figurines because it could be something the child already owns that's being placed on the cake as decoration... but once you purchase the figurine you have already paid disney or whomever for use of that item...
I may sound a little cautious, but with all the recalled toy products from China due to their lead content, I would see where the toys were made. Just a thought.
I agree with texasbecky... check those plastic figurine to see where they were made. I had purchased a large bunch over the past year (many different characters) from dollar stores, sales, etc. only to find out that more than 3/4 of them (about 50 in total) were made in china and some where on the recall list- so sad to say they all are in the garbage now. 
You guys had me worried lol I just bought my daughter 4 disney princess figurines and checked the box and they were Made in China so I called the 800 # on the back of the package just to be sure before she gets home and gets ahold of them and they said they were all tested and have been cleared for use and they will continue to check all their items before distributing them.
She also told me I didn't sound like a fruitcake nut case calling lol but told me it's a great idea with all that has happened recently with the bad toys and bad toothpaste to call from the store before purchasing that way if there is a problem we can alert a store manager immediately to remove them from the shelves and we don't have to fight to get our money back.
I would also suggest even though they may be bought as CAKE TOPPERS, I'd wash them in hot soapy water before letting them touch the cake just because there may be some nut case out there that puts something on them after their made... I always wash everything before it touches the cake just to make sure 
My lawyer told me that if I buy a copyrighted toy/topper for $3.99 I have to charge $3.99 for it to the customer.
I can't pofit from it in any way shape or form.
If I use a topper for example Disney Princess for a cake and I put it on there. I charge X$ for the whole cake. This isn't extra or and extra charge put on the cake I would have charged the same for the cake even if I didn't put the princess on it. So in a way, I am not getting paid for the topper. Does that make any sense to anyone? If I have to create a special topper then I charge extra but for a toy, it is already included.
OhMyGoodies- Even if you draw the characters by hand, it is still copyright infringement if it is a copyrighted character such as Disney characters. When I started teaching elementary art in the late 70's, I would draw out the characters that were the current rage for bulletin board decorations. For instance, I drew out the the Star Wars characters nearly life size and used them as cutouts for my bulletin boards. By the time I retired three years ago, we were continually reminded that we could no longer do that even if they were not traced and they were in different poses etc. I threw out tons of bulletin board decorations from Garfield to ChewBacca that would qualify as infringement. You can use things that are meant to be copied like Clip Art. Some companies are more stringent than others as far as enforcement goes. We were told that Disney is particularly strict. I have also been told that Harley-Davidson can be picky about it.
See this whole subject is so messy. It is almost scary to do anything close to characters and things. You just never know. 
I had a similar question to this some time ago, and got all my answers on the following link:
http://forum.cakecentral.com/cake-decorating-ftopict-215411.html
From my understanding, you shouldn't be selling anything that is a copyright image, which includes pans and figurines. The customer could buy the figarines and give them to you to put on the cake, but you couldn't purchase them and include them in the price.
Hope it helps!
What I normally do, and plan to do with my next cake which needs Dora and Boots and Swiper figures is to purchase them and tell the birthday girl that is part of her gift from Aunt Becky and Uncle James. 
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