Marketplace content usage inside my applicaiton

I am developing an augmented reality virtual dressing room application in unreal where users can create photos, short videos of themselves wearing virtual costumes. The library of costumes are created from 3D characters purchased on the marketplace. Every costume is distributed in a separate .pak file in cooked form that can be downloaded and used only inside the application. Business model will be subscription based, where clients are paying a monthly or annual fee to use the software and the asset library, on trade shows, private events, museums, theme parks, etc.

  1. I would like to know if assets purchased from the marketplace can be used in my application, and distributed such way.

  2. I would like to also know if assets created by epic games such as the paragon characters can be used the same way, and if there are any additional requirements regarding them.

  1. You certainly can use Marketplace assets in your application, but users must not be able to extract Marketplace assets from the pak files.
  2. The Paragon assets for use within UE projects only. You should be good on that point since you’re using UE. In addition, you can’t create Paragon sequels, remasters, or otherwise emulate the original game or use the original game’s trademarks, character names, or other IP to advertise or name your game.

Thank you for your answer.

Please let me ask another question, in this regard.

  1. Is it also permitted to sell those assets in a store and charge a small amount for them individually? For example $5-10 / asset ? (Assets would be in packed format, and could be used only this application)

Yes this is permitted, and you will owe 5% of such sales revenue.