I am confused by copyright law, i get the basic, don't steal peoples stuff, but for these tee's i often find myself using an asset of a logo, or character
Example:
here i did not use anything but the character and his pose, i did however use reference images and a trace of his outline to fine tune my edges, and curves. and with this and many other designs i've shows friends they all get up and on about me being sued for copyright infringement. so i'm just curious to know how exactly this works out, i mean i know there is laws in place but how do i avoid crossing them and have i crossed them?
any advice would be nice (not asking for binding legal advice just know how from the designers in this community)
Example:

here i did not use anything but the character and his pose, i did however use reference images and a trace of his outline to fine tune my edges, and curves. and with this and many other designs i've shows friends they all get up and on about me being sued for copyright infringement. so i'm just curious to know how exactly this works out, i mean i know there is laws in place but how do i avoid crossing them and have i crossed them?
any advice would be nice (not asking for binding legal advice just know how from the designers in this community)
Check out this link about it as well.
http://en.wikipedia.org/wiki/Parody#Copyright_issues
Parodies are legal. Your wrapping paper likely caused problems because it was not considered parodic by BBC.
"The Court pointed out the difference between parody (in which the copyrighted work is the target) and satire (in which the copyrighted work is merely a vehicle to poke fun at another target): "Parody needs to mimic an original to make its point, and so has some claim to use the creation of its victim's (or collective victims') imagination, whereas satire can stand on its own two feet and so requires justification for the very act of borrowing.""
Parody must also be sufficiently transformative from the original work in such a way that is creatively distinct and holds the original up to ridicule. If the original is instead used to merely garner attention or avoid the drudgery of creating new works, it does not qualify as parody.
As much hard work as this wrapping paper was, it's not derivative enough from the original to be considered parody.
I got this link through fuzzy's link
I would not use exactly "mewtwo" as that is probably trademarked (that's why you never see "Star Wars" or "Dr. Who" on any of these shirts.
Your art itself looks close enough to the drawings used by the Pokemon creators that you could potentially be sued if you used this outside the fair use context. So if you sold it.
This is not to say that you are not artistic or that your art is not any good. But yea, what HappyGoCrazy said.
Also, people will sue you for anything they can. :D