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Royalties for project when program is inseparable from large facility

Our client wants our company to develop a 3D interface for industry facility terminals to replace their old 2D one. My company is therefore looking to sell facility tailored interface programs to that client, each for a fixed price. Our client will then sell each one of those interface programs – exactly once – along with the facility it was uniquely designed for. It will very likely be impossible for our client to separate the price of the interface from the price of the facility when selling the combined product and I’m also not very optimistic, whether our client will be disclosing their revenue to us for royalty calculation purposes. They’re also not willing to pay the 5% themselves, so the “they license, we work for hire” model won’t work. How do we calculate royalty if the client 1. does not disclose his gross revenue or 2. is not able to separate the interface price from the facility price in the final sale? If there is no price difference between the 3D and the former 2D interface for the end user, is then the product to be considered as “free” for royalty calculation? Thanks in advance!

Product Version: UE 4.10
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asked Jan 26 '16 at 02:14 PM in Legal & Licensing

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DeinMentor
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avatar image atypic STAFF Jan 26 '16 at 02:21 PM

Will the work be custom for the client?

How will the client monetize the 3D interface - will it be used in conducting their business (and thus only indirectly related to their revenue) or will they sell/license the UE4 product further?

avatar image DeinMentor Jan 27 '16 at 11:32 AM

Hi Canon and thanks for your quick reply. Yes the work will be made custom for our client only and we will not sell the product to anyone else. Our client on the other side would be selling those industrial facilities which would have the UE-made 3D interface integrated. I'm unfortunately not sure if that means they use it "conducting their business".

avatar image atypic STAFF Jan 27 '16 at 02:55 PM

So your client will monetize the one-off custom UE4 work, as incorporated into a structure, to their clients?

avatar image DeinMentor Jan 27 '16 at 03:42 PM

Yes that's right.

avatar image atypic STAFF Jan 27 '16 at 05:22 PM

Please reach out to legal (at) epicgames.com for further discussion.

avatar image DeinMentor Jan 28 '16 at 02:28 PM

Ok, will do. I was already sent here by royalty (at) unrealengine.com so I'm hoping the team you pointed me to is finally the right one.

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