I just heard back from Nancy Tracy. She doesn't mind the "Tat This!" challenge, since no one is trying to claim her idea as their own or make money from it, and she says she is interested to see what people come up with. On that note, Geraldine has finished her third round.
Unfortunately, it seems that the fabric manufacturer has violated Nancy's copyright, as she had never seen or heard of the fabric before. I really hope that she is able to get this resolved and get paid for her design. Until that happens, I don't feel right about owning the fabric, so I will be returning the piece that I bought.
Copyright is important. A person who comes up with their own original design deserves to get credit for it, and if someone wants to make money off of somebody else's design, the original designer deserves to get paid. If a designer offers to share their work that is fine. But nobody has a right to take somebody else's design without permission.