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"The legal situation surrounding Geno (and Vaati) is not the same as Sonic and Megaman. Yes, Geno is third party and owned by Square Enix but Nintendo really has more say in the character. Why? Because Geno was in a Mario game (a first party franchise owned by Nintendo) that makes him a Mario character. There's no getting around that. Because of this, Square Enix cannot legally use him outside of this context because (as the copyright says at the end of all Mario games) Nintendo owns all the scenarios that occur in the Mario games. Geno was part of the story in Super Mario RPG thus pulling him into the scenario AKA the story and plot points of the game. My point was proved both during the offical Melee and Brawl polls when Geno was, despite his legal situation, categorized as a Mario character and seperated from the other third party characters."
"Now that is cleared up, let me explain things further. Because Geno is a Mario character, Square Enix cannont legally refuse Nintendo the rights to him if they wish to use them nor use him outside the context of a Mario game unless Nintendo is involved with the project. In the end, Nintendo basically controls the situation surrounding him and that makes Geno pretty much worthless to Square Enix. For further proof of this, ask yourself this: Why was Geno in a Mario game that Square Enix played no part in developing? Mario and Luigi: Super Star Saga was developed by Nintendo and Alpha Dream. It is even questionable whether or not Square Enix recieved some of the profits based on Geno's inclusion in the game."
"Now let's compare Geno with Sonic. Sonic makes millions of dollars for Sega every year and is their biggest icon. Geno is a character that was playable in one game that sold about 2 million copies worldwide more then a decade ago and has basically been sitting in a filing cabinet since 2003. See a difference? I certainly do."
"So there you have it. Geno's legal situation laid out in black and white. Yes, Nintendo will still have to get permission to use him and probably have to pay a minor fee (would you like to compare the "rental" cost of Sonic's or Megaman's copyrights to Geno's?) for him but, in the end, Geno is very, very different from other third party characters."