How does EPIC track my release for royalties?

Just a curiosity.
I read the EULA multiple times about the 5% royalties.
There are 2 questions:

  1. How does EPIC track my releases if I don’t notice them in any form? If I don’t notify them anything, means that no products made with UE, but I actually earn money with products made by UE.
  2. UE is open-sourced, and we don’t use any services from official help. Why do we must pay royalties to EPIC?

Of course I know the cost of maintaining such a great engine is extremely heavy. Any fee of using the engine would be a great help for dev team. Just a curiosity, hoping hear some options or explanations, thanks in advance.

I’ll answer your two questions in turn:

  1. You have a contractual obligation in the EULA to provide Epic with notice of your game’s release. You can do that here. You also have a contractual obligation to royalties on revenue earned under the EULA.
  2. Paying royalties is your obligation to Epic when you accept the EULA in order to gain access to the code.

I don’t believe it is Open Source. People are just given Full Source Access.

I think open source is an imprecise term; you’re right that sometimes it implies free usage which isn’t the case here (considering the royalty). Full source access is a better way of saying it for UE4.

And, also, If you don’t notify Epic about your game, in your country-specific grace period if any (country laws always override EULAs), then, IF you release your game AND your game gains enough traction AND Epic sees your game, AND, if up to this moment you still didn’t paid all your royalties AND Epic decides that your EULA breach is harmful for them, THEN you are in court trouble. Epic may decide to fire a lawsuit against you and nobody knows what may happen.

If your country has a grace period for business / company registration and/or for taxes, like some EU countries do, in general, this grace is not to be affecting the actual EULA, however, it’s challenging for companies, since country laws override EULAs if conflicting! (case with Tax-free periods being a good example)

If you are indie, notify Epic about your release and start tracking your revenues. If you still don’t have a company and do not want to register one yet, track your revenues. The $3000 grace Epic gives to you is extremely fair enough. Once your game reaches $3K/quarter, feel free to register a company and start paying Epic. If you do not want to register a company during your Tax-free or grace period based on country laws, then… contact Epic and decide if you can pay them without being an company. Since the form does not mention “Company”, then it looks like Epic have no problem with non-company indies.

However, if you start real earnings, e.g. 10K+/quarter, then, you will, by most jurisdictions, be enforced to register a company since, after your tax grace period ends [if any], you will owe taxes to your jurisdiction as well.

Also, Epic’s grace is based on your gross revenue. If you sell app for $10 on Steam, and your contract with VALVe is the classic 70/30, then, Valve takes $3, and you take $7. However, you owe Epic $0.50 (based on these whole $10).
Now you have $6.50. You owe tax to your country. And in case your country’s law is based on gross taxes as well, and the tax is 20% foe example, then, you give your jurisdiction $2. Now, you end up with $4.50… However, most modern jurisdiction base their taxes on the actual income, called Income Tax, so if for example, income tax is 10%, then you owe your jurisdiction $0.65 so your $6.50 become $5.85. This ends here.

Also please note that, unfortunately, EULAs aren’t true contracts from legal point of view. No contract is a contract if not physically signed, and most old companies will force you to sign a contract if they feel that a EULA will not suffice alone [country laws, again]

Please note, that, the above text is only informative. If you have further questions, seek legal consultation from a local lawyer.

Also, the law itself is a double-bladed sword. Imagine a country called Unityland. In this country a law that prohibits companies containing “Epic” in their name from collecting any loyalties and revenue from their engine. Epic will become aware and may ban the engine in this country since this country is break. However, if you pirate the engine from a friend and use it then it will be a total mess for Epic to sue you. If you only sell your game in Unityland then it will be very hard for Epic to sue you for non-owing royalties. However, epic may sue you for copyright violation. Now, if in the worst case scenario, this country have totally bugged policy and copyright does not exist, then Epic are out of luck. Well, no such country exist, so: be honest and play by the rules. Respect the EULA, pay your royalties, pay your taxes, or… if you dislike taxes, then write your own Engine, your own Steam,. sell it there and miserably fail [me being realist now if you decided to write your own Steam]

I generally agree with the sentiment of this comment, and won’t comment on the whole thing, but I did want to make a few caveat statements:

  • You don’t have to register a legal entity (like a company) in order to report a game release or pay royalties to Epic.
  • You have an obligation to report game release even if you don’t have an obligation to pay royalties (i.e., if your revenue falls below the threshold).
  • Epic absolutely views the Unreal Engine EULA as a true and enforceable contract. If it’s not a real contract, then it’s not a real license. If it’s not a real license, then you don’t have a license to use the engine.

According to the Bulgarian law, “No sign means no contract”. This policy makes EULAs legally non-binding documents here and we had cases where local courts decided that Microsoft Windows EULA breachers (Home users pirating Windows) are innocent. (Thus failed Microsoft’s anti-piracy attemps).

The only way to enforce binding in this particular jurisdictions… to find a way to make sure you get signed contracts with developers and even notarizing them.

Still, I cannot imagine why there are such people that care that much about $150 royalty out of $6k. After all, using a ready-made engine for 5% royalty is… like a theft! Seriously, if it were me I would propose a 20% shareholding contract and this will indeed bind and really oblige me to pay these, even in our bugged otherwise jurisdiction. Well, the good old times where engines costed $100K for source-code access… :slight_smile: You guys should understand than currently, no better offer exists than Unreal. For example, Unity will shave you ~$1500/year at minimum if you want to release a game without the splash screen. Unreal will not even touch your wallet if you fail miserably with the marketing and cannot generate more than a beer. These were my 5 cents.

However Downloading the engine is an agreement to the EULA so according to this section:

  1. Governing Law and Jurisdiction

You agree that this Agreement will be deemed to have been made and executed in the State of North Carolina, U.S.A., and any dispute will be resolved in accordance with the laws of North Carolina, excluding that body of law related to choice of laws, and of the United States of America. Any action or proceeding brought to enforce the terms of this Agreement or to adjudicate any dispute must be brought in the Superior Court of Wake County, State of North Carolina or the United States District Court for the Eastern District of North Carolina. You agree to the exclusive jurisdiction and venue of these courts. You waive any claim of inconvenient forum and any right to a jury trial. The Convention on Contracts for the International Sale of Goods will not apply. Any law or regulation which provides that the language of a contract shall be construed against the drafter will not apply to this Agreement.

In Bulgaria you may be found innocent but in America, you will have a warrant for arrest.

That is why if someone wants to do business should avoid ■■■■ moves and just report/pay his royalties. After all, we have great engine with great licensing and business model. Even better model than Unity :slight_smile: The rest is “Legal Hacking” and “Jurisdiction abuse” - I don’t like them indeed.

The OP should concentrate of making a great game rather than playing Legal Wars, and be honest about his business after launch.