Ok, I got the reply...
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Not sure I understand the question.
1. Are you going to make a mod to the JJ2 game that includes the JJ
character?
2. Do you want to make a new game that uses the JJ character for your
personal enjoyment only?
3. Do you want to make a new game that uses the JJ character for
distribution (free or otherwise)?
1 & 2 are no problem. Have at it and enjoy.
3. Is a big problem. The minute you release something that makes use of
our trademarked and/or copyrighted material (even if it is free) you are
infringing on our rights. We, by law, are forced to take action. It
just gets plain nasty at that point.
Regards,
Jay Wilbur
Epic Games
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So, I'm just going to continue the project with the new character, and storyline. Sorry that I spoke too soon about making a Jazz Jackrabbit game. I made a bit of art before I got the answer, I know just a bit of fan art won't get Epic's goat  . Makes a nice desktop wallpaper.
http://purrhead.tripod.com/jazz3d/jazzcontinue.jpg
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