Wants to Make Movies of Customized Puppets

Dear Rich: I have a question about puppets! My friend and I are planning to start a YouTube channel where we upload puppet show videos we shot. Some of the puppets are completely original, hand-made. But some puppets are bought - from Silly Puppets, Sunny Puppets and some Muppet Whatnots that we customize. Of the bought puppets, some are heavily modified, some lightly modified, some just in costume changes. So my questions are somewhat progressive: (1) Do we have the right to put up videos online that use these commercial puppets? We don't want to get a large body of work done only to be later told we can't use any of it. (2) Should we list the manufacturer of the puppets in the credits? (3) If we start to get revenue sharing from YouTube from advertising (for many hits), do we have the right to that money or would the puppet manufacturers have some right to it? (4) If it someday came to the point where we were making direct money from our show idea (DVD sales, TV series, whatever), would their be legal issues and questions about claims to the profits? The short answer is that we don't know what will happen. There are too many variables to give you the thumbs up. We do know that the less success you have, the less hassles you'll endure. So, if things start taking off, you should switch to all-original and heavily modified puppets. Let's break out the factors.

• The puppet maker has an enforceable copyright. Assuming there is sufficient originality in the design, (sock puppets might not count), the manufacturer owns copyright in the puppet's appearance. As our readers know, purchasing a copyrighted work doesn't automatically convey the right to publicly display or publicly perform the work. So, assuming the puppet is protected by copyright, the manufacturer controls rights and can stop unauthorized uses. Okay, but ...
• The puppet maker may be reluctant to enforce rights. It would put a damper on puppet sales if a manufacturer were to clamp down on every customer who made a YouTube puppet video. So, as a general proposition, if you don't attract too much attention, and you don't upset anyone, your videos will stay posted and undisturbed. It's even possible that some manufacturers may never care. (We wouldn't go so far as to urge the use of copyright-protected puppets for their SEO value.)
• Customized puppets make it more confusing. Obviously original puppets are no problem, as are puppets that are so customized you can't recognize the orignal.  (We also don't think that creating a Muppet Whatnot amounts to original authorship). But, in general, creating a derivative puppet won't shield you from infringement claims.  
• Puppet makers may take action ... A puppet maker is more likely to take action if (1) you used the puppet in a scandalous or offensive manner (which is why attribution may not be a good idea); (2) you capitalized on one or two puppet characters -- for example created a popular series with two Silly Puppets -- thereby affecting the ability of the manufacturer to license or otherwise exploit the puppet, or (3) you used the manufacturer's trademarks in the titles of your works. Note, though owners of puppet characters have exerted rights on YouTube, we believe the current tendency is to tolerate many types of infringements. In other words, you may not have a chance to earn YouTube ad revenue because the owner of the puppet copyright would already have a hand in the till. 

PS Every time we answer a puppet question (it's only happened twice), we're reminded of our favorite Philip Roth book, Sabbath's Theater, which unfortunately we can't recommend to all readers because of its "distasteful" subject matter.