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What can be defined as Work-for-Hire?

I just read one answer from Canon Pence who says:

...work-for-hire fees are exempt from royalty, so no royalties would be owed.

And i want to know if it was just for a matinee export? or everything applies like full demo/applications? Let's say making a full app working for hire, for an individual/company who could use it just internally or as a product/showcase/etc..

Thanks in advance

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asked Apr 08 '14 at 05:32 AM in Legal & Licensing

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Shoobis
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4 answers: sort voted first

I would say that work-for-hire fees, as a category of revenue, are exempt from royalty. Whether or not royalties apply to a resulting product is a separate question. So, for example, if a museum hired a developer to make an art installation using UE4, and paid the developer $10K, those development fees are exempt from royalty. And, because it's a non-revenue-generating art installation, no royalties are owed on that either.

In another example, let's say a publisher wanted a developer to develop a game. If the publisher paid the developer $500K as a recoupable advance, royalties are owed on that advance. If the publisher paid the developer $500K as a non-recoupable development fee, no royalties are owed on it. A separate question is who owes royalties on the game. Assuming the game is sold, someone owes royalties on the game sales. The best solution is for the developer to ensure that the publisher takes at least one UE4 subscription license and then the publisher can be responsible for royalty payments on the game. However, if the publisher won't assume responsibility for royalty payments under a license, royalty payments for game sales are the responsibility of the developer.

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answered Apr 08 '14 at 02:49 PM

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atypic STAFF
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avatar image Shoobis Apr 08 '14 at 06:56 PM

Excellent, thanks a lot Canon! My doubt was more like the first case and it's wonderful you guys make that exception, its more than appreciated.

Just to know, in those cases who are exempted, there's still the need to report those releases?

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Work for hires fees are exempted from royalty obligations for any UE4 work.

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answered Apr 08 '14 at 02:29 PM

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atypic STAFF
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All game or product releases under the EULA must be reported, even if no royalties will ever be owed.

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answered Apr 08 '14 at 07:10 PM

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atypic STAFF
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avatar image Shoobis Apr 08 '14 at 08:43 PM

All right nice reminder.

Thanks again Canon and let me congratulate you, Tim and all the Epic staff for your very fast responses, for being so active, hearing us in the forums, giving power to the people, etc, etc. I believe we'll grow together a lot staying united and very quick at this pace, keep it up!

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What they mean by that is that the person working on the work for hire would not be responsible for a royalty in addition to the royalty due by the publisher. That is, if you are working for a company and buying your own copy of unreal engine, you would not owe a royalty, although the publisher still would.

The real question is when the product is used internally or as a product/showcase, etc. I have no idea what they will do for that. I expect that it's a case by case, although most should not have a royalty attached.

If you're creating a work for hire for an architectural firm so they can walk their clients though a planned building, are there any royalties due? I would think no since you're not selling it, but I'd definitely want an official answer before doing something like that just because I'm paranoid ;).

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answered Apr 08 '14 at 02:33 PM

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RalphTrickey
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