Copyright in a pattern normally pertains to the pattern itself, i.e., to the written instructions, diagrams and/or pictures, not to the object that is constructed from the pattern.
If the pattern, however, includes original artwork that would be incorporated into the work that is made, then a person may need permission to use it commercially. An example of that would be a knitting pattern depicting original artwork. An example of the opposite would be a dress pattern: the dress made from the pattern is not subject to copyright protection.
Here are two examples where both patterns, i.e., the written instructions and artwork, are protected by copyright, but only one of the products made from the patterns would be protected.
1.) A pattern for a sweater made with standard knitting stitches, such as a cable stitch or a popcorn stitch, is protected by copyright; however, the sweater made from the pattern contains no copyrightable artwork because it consists of standard stitches, no matter how attractive the sweater is.
2.) On the other hand, a pattern for a sweater that depicts original artwork — let’s say a mountain scene with a deer — is protected both in the form of the pattern and in the form of the sweater. The artwork on the sweater is protected by copyright.
In the first instance, a person using the pattern can produce sweaters commercially, but not be infringing a copyright because the distribution of the sweaters is not distributing any copyrightable authorship.
In the second example, by distributing the sweaters, the person is also distributing copies of the original artwork and would normally need permission.
It is important to point out, as this reply does, that there can be copyrighted material in the form of knitwear. In the example given, an original image of a deer and a mountain created by a designer and then included in a knitting pattern would be copyrightable as artwork. That same artwork could be screen printed onto a t-shirt, printed on a mug, or made into a poster. Doing any of those things with another person's art work is an infringement of their copyright. If you buy a pattern, you can make a FO from it, but you may not be allowed to distribute it to others.
The distinction that Copyright law makes is that utilitarian objects, including all clothing design, is not subject to copyright, but artistic elements that are separable from, or at least conceptually separable from, the useful object can be copyrighted. So no one can copyright a mug, no matter how shapely. But they can copyright a picture that is applied to a mug.
Here's a legal document explaining the basic law and several cases drawn from it.
Here's another, slightly more light-hearted explanation of how current law treats clothing design and that discusses possible ways the law could be changed. (Until the law is changed--and it hasn't been--no one should feel guilty for copying fashion design, which includes the design of knitted wearables.)
One more caveat: while sweaters, skirts, diaper covers, hats, mittens, socks, blankets, and so on are clearly not copyrightable in and of themselves, it is possible that some knitting, such as toys, could fall into the realm of sculpture rather than utilitarian objects, and so could be copyrighted as objects.
However, here is an example of a case which went to court, in which a pattern for a craft item was distributed, and when a buyer used that pattern to make and sell Finished Objects,they were sued. The designer lost the case, even though the item was far from useful:
The United States District Court for the Eastern District of Michigan held that a “witch crashing into a tree” design enjoyed only a narrow scope of protection....
In that case, the plaintiff had created a two dimensional textual and graphic work, a craft project, that gave diagrams and illustrations instructing readers in how to make a Halloween decoration that depicted a witch, on her broomstick, crashing into a tree.
While the two-dimensional project instructions [ie the pattern] were entitled to protection, the court declined to find infringement against a defendant who manufactured and sold the finished sculptures. To do so, the court held, would be tantamount to protecting the “idea” of the crashing witch, as opposed to protecting the expression embodied in the instruction form. Id. at 615. “[D]iscounting trivial variations, there is essentially only one way to express the idea of a witch crashing into an object while flying on a broom; thus, under the merger doctrine, since the idea and its expression are inseparable, the copyright is no bar to copying the expression.”
