I am interested in opening a store that sells candy-making
products and candy made from molds.  I have found some molds of
characters such as Bob the Builder, Dora, Strawberry Shortcake, etc. 
Can I make candy from the molds and sell them, or is this a copyright
infringement?  What if I alter the product slightly (eg make Bob's
shirt out of green candy instead of red and yellow)?  How aggressively
do companies pursue a "mom and pop" store selling locally?

nkamom,

Making a figure from a mold of a copyright-protected work, like a
cartoon character, is technically known as "making a derivative work."
 When you buy the mold, the copyright owner is granting people who
purchase the mold a limited license (permission) to make these
derivative works for home use.  The resulting figure is, in all
respects, a faithful reproduction of the original copyrighted
character, and copyright protection attaches to the molded figure.  I
very much doubt that the copyright owners would approve of your
selling their copyrighted figures without paying them a royalty fee.

Here's an analogy:  let's assume that I am watching Spongebob
Squarepants (who apparently is now gay--go figure) and I grab a lump
of clay and mold an exact reproduction of Spongebob.  The owners of
the copyright in the Spongebob character still own the copyright in
and to any likenesses of Spongebob--changing the media used does not
matter.  So sure, they'd be mad if I made a thousand of these figures
and sold them since I am profiting from using their intellectual
property and they are not getting a dime in royalties.  Changing the
color of the shirt does not help you.  You have to vary the original
work enough so that your work is a wholly new creation and not merely
a derivative work to avoid copyright infringement.

Will they come after you?  If they find out about you and if you are
selling a bunch of these things they will.  If you?re going to open a
store, you should contact the owners of the rights to the figures and
get a license.

Thanks, ipfan.  I guess I already knew that.  I was just hoping the
answer would  be different.  I suspect that so long as I avoided
internet advertising, it would be hard for them to find me.  However,
I do try to do the moral thing, and would have trouble purposely
infringing on someone's copyright for my own gain.  Guess I'll have to
stick with rainbows and flowers.