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In my game, I plan on implementing various optional unlockable costumes, earned by collecting in-game items. One hypothetical example of such a costume would be Banjo's (from Banjo-Kazooie) shorts, backpack, and shark-tooth necklace. In trying to find the answer to this, I've found plenty of information about directly using Banjo himself (clearly illegal without a license), but I haven't found any form of direct answer when it comes to his outfit placed onto the main character.

The closest thing I've found to an answer are similar cosmetics being used in other games -- In TF2, for example, there's a hat that references Mario's hat, but replaces the M with an E, while in Terraria, there's a direct recreation of Mario's entire outfit. Obviously, though, just because another company was able to do such a thing doesn't mean I necessarily will be able to as well.

Lastly, I'm not sure if it makes much of a difference, but it's also worth mentioning that the art assets used for these costumes would be entirely created by me in the image/likeness of the other characters' outfits -- obviously, ripping said assets from the games themselves would NOT be legal. Also, I do plan on selling the game and making a profit on it.

Would creating these homage outfits be legal, or would it violate the copyright and/or trademark (not sure which applies) of the character?

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IANAL, get one, but....

If you don't mention, that it's the short/backpack/necklace from Banjo Kazooie, then there's little to no chance that Microsoft could dedend them.

If you search for "yellow shorts", "blue backpack" or simply "sharktooth necklace", then I can guarantee you you'll find very similar clothes. And you can't trademark or copyright everyday objects.

You mentioned Terraria. It also has the "hero outfit" which is basically Link's costume and the "plumber's costume" which is mario's outfit. So you can make the chance even lower if you name the costume "a bear's costume" or something similar

It's important to mention, that the mobile port of Terrarian changed most references (e.g. the Hero outfit became purple) to avoid any potential lawsuit just in case.

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