Thanks for the replies. After I posted the question, I spent a considerable amount of time looking around on the net for information about this. Apparently there's a lot of misinformation around.
The best source of information I could find about it is here. http://www.tabberone.com/Trademarks/CopyrightLaw/Quilting/Quilting.shtml
In short, it's governed by federal law in the US, and the law is (currently) that if I buy a pattern or buy a book with patterns in it, the copyright does not extend to what I make out of the pattern. The pattern itself is copyrighted, so you can't copy it (for others) or sell it etc. or copy it and say it's yours. But what I sew from the pattern is mine to use, sell, give away etc., and there has never been a lawsuit that a) went to trial over this or or a federal case that was decided in favor of the copyright holder.
Interestingly enough, there are tons of folks (all people who have copyrighted patterns) who say that you're not allowed to sell what you make from a pattern. And almost all patterns say that on the package, that it's for "personal use only". But as far as I can see, there's no legal basis for it, and they can't enforce it. There is also no "moral" requirement under the law. Lots of crafters are very nervous about this and often bullied by those who did the patterns.
I don't want to start a firestorm here--I'm sure there are lots of pattern designers here. This is my opinion only. However, since I'm going to start a business shortly, I'm going to get a legal opinion on this before I start--on what the law is and is not, in the US and in Canada.
Quite frankly, if I purchase a pattern or a book of patterns, if I'm not free to do what I want with what I make from following the instructions, then I'll never buy another pattern.