I’ve had this question for the longest time and I’ve forgotten about it until now. How exactly do authors get permission to use other authors characters?

For example Watcher from the original fallout Equestria appears in at least two other fics, Project Horizons and Pink Eyes. Do people go up to the authors and just…ask for permission? Or are some characters just open source? Genuinely confused for the longest time and I wanna know.

Just ask. I asked Kkhat if I could borrow RedEye and some members of the Grand Pegasus Enclave and Kkhat told me yes.
Just politely ask them.

As PurpleArtist has said, just ask. Granted some will not reply. In that case, I do not use their character directly. If I do use another person's character directly after getting permission, I then make sure I credit that person for creating the character and thank them for letting me use them. I also like to send them a copy of what I wrote with their character so that they can down-check it if they feel it is not how their character may be.

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In general, the standard courtesy is to ask for permissions from the authors to use, develop, expand, etc. their stories, including characters, lore, worldbuilding, ideas, etc.

But in the fanfiction world, that rule is not always strictly followed or enforced, since our creations here are all non-profit and for the sake of sharing creativity. Especially for a story that's as famous as F:E, which practically created a fandom of its own, then it kind of gains the status of "fair game", and people are free to write fanfics of it without having to ask for permission from the author (While F:E is a prime example, it's by no means the only one. Others include Cupcakes, Past Sins, Rainbow Factory, to name a few). Of course kkat is also practically cool with it. So you're free to use whatever character in it for your own story. After all, what's the difference in using Watcher as opposed to using Littlepip, like thousands of already published F:E fanfics out there? They're both kkat's characters.

Just ask, they're not going to bite your head off.

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its polite to ask permission but it's not like Kkat asked Hasbro permission. it's all fanfiction I think as long as your not profiting off it its fine.

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and of course never use anything from anyone else without crediting them