Lawyers from the Fund have written to dozens of companies warning they will be pursued unless they stop manufacturing tacky or morbid souvenirs which upset the Princess's family. The Office of Fair Trading is also examining items sold by disreputable companies to exploit the public affection for Diana.
The items under investigation by the Fund include "Diana Windsor's driving licence", which is being offered for sale by an American company on the Internet. Alongside a picture of the Princess, it includes her address as "Kensington Palace, London, England", her date of birth and her "expiration" date as 08-31-97, the day she was killed in the Paris underpass.
The Fund - whose president is Lady Sarah McCorquodale, sister of the Princess, has also complained about pink packs of Lady Di cigarettes, marketed in Poland despite Diana being a non-smoker and patron of several cancer charities. Warnings have been given to the makers of flick-knives, decorated with Diana's face, and colonic irrigation sets, dedicated to the Princess and sold in her name.
British embassies have been asked to police their countries and make sure the reputation of the Princess is not being undermined for commercial gain. The Fund has been inundated with complaints from people about available Diana products.
Fund sources say some items are offensive, others simply tasteless. A series of three size-graded flying ducks - with the Princess's face amid the wings - are being investigated. Loo seat covers, fluffy slippers, and Princess Diana beer and wine have been rejected.
The Fund has also complained to the government of Grenada about stamps, featuring the Princess, which have been produced without permission. The stamps, official tender in the Caribbean country following an Act of Parliament, include different watercolour images of Diana. They are available in a presentation set, with a label reading: "The People's Princess lived an all too short life but will always be remembered for her contributions to the betterment of mankind."
The stamps are not offensive to the family, but Fund officers say Grenada has no right to use the Princess's name or image without permission.
The Fund spent pounds 780,000 on legal fees last year, and a legal battle with the American company Franklin Mint over a Diana doll is costing an estimated pounds 30,000 a month. The small range of approved Diana souvenirs, includes a tartan scarf, a candle and a teddy bear.