Here's what my interpretation is. The embroidery website states the following about the embroidery files:
"Merchant Marine Academy
© Copyright 2011 by Bella Mia Designs
By licensing these designs you agree to these terms: This design is copyright protected by Bella Mia Designs and may not be distributed, altered or unaltered in any format outside of embroidery designs.com or directly from Bella Mia Designs. Items with this design sewn onto the product may be sold commercially with limitation. You must have written consent to mass market items using this design. Bella Mia Designs will not be held liable for any monetary losses or consequential damages as a result of using this design."
It is the file itself, as digitized and produced by Bella Mia Designs that is protected. It has always been my understanding that U.S Government logos are not copyright protected. This is what Wikipedia states:
"Copyright status of work by the U.S. government
From Wikipedia, the free encyclopedia
A work of the United States government, as defined by United States copyright law, is "a work prepared by an officer or employee of the U.S. government as part of that person's official duties."[1] The term only applies to the work of the federal government, including the governments of "non-organized territorial areas" under the jurisdiction of the U.S Government,[2] but not state or local governments. In general, under section 105 of the Copyright Act,[3] such works are not entitled to domestic copyright protection under U.S. law, sometimes referred to as 'noncopyright.'
The act only applies to U.S. domestic copyright as that is extent of U.S. federal law. The U.S. government asserts that it can still hold the copyright of those works in other countries.[4] However the language of the statute implies no geographical restriction on its denial of copyright protection to U.S. government works as it says, 'Copyright protection under this title is not available for any work of the United States Government….'[5]"
As USMMA is a federal entity, the logo is public domain.
I am ready to stand corrected!