Licensing Agreement Breach: 7 Legal Remedies in Texas

Developers of intellectual property (IP) – such as technology, software, patents, brands, trademarks, or copyrighted materials – may consider monetizing their intellectual assets by entering into a licensing agreement with another party. These agreements allow the licensor to expand the market reach of their property without losing control over the use of the asset. The licensee, on the other hand, can profit from the licensor’s intellectual property without investing in its research and development.

But what happens if one of the parties breaches the licensing agreement?

If your licensing agreement has been breached – or you are facing an infringement claim – the Houston-based attorneys at Hendershot Cowart P.C. are ready to help. Contact us online or call (713) 783-3110 to schedule a consultation.

What Happens If a Licensing Agreement Is Breached?

If a licensee breaches a licensing agreement, you may pursue breach of contract claims, seek injunctive relief to stop the unauthorized use, recover damages, including lost royalties, or – where trademark or copyright infringement is involved – pursue statutory damages.

The stakes are especially high for startup founders and tech companies who are vulnerable to rogue licensing partners breaching technology licensing terms, putting years of development at risk.

Alternatively, if the licensor violates your agreement, such as by making use of the licensed material granted exclusively to you, you, as the licensee, could sue the owner for infringement.

The right legal strategy depends on whether the violation constitutes a breach of contract or an infringement of the underlying intellectual property.

Is It a Breach or Infringement? Licensing Infringement Defined.

Since the remedies and damages available for a licensing agreement breach versus infringement are not the same, understanding the type of case you have is critical.

License Infringement occurs when a licensee uses the intellectual property outside the boundaries of what the license permits – essentially using the IP without authorization. It often arises when a licensee exceeds the scope of the license in a fundamental way – for example, distributing software beyond the permitted user base, using a trademark in an unauthorized market, or exploiting a patented invention in ways the license never allowed.
Breach of Contract occurs when a party violates a specific promise or a covenant in the licensing agreement that does not go to the fundamental scope of the IP rights granted – such as failure to pay royalties, missing a reporting deadline, or violating a marketing restriction.

Which provisions were violated matters: Conditions tied to vesting of the right to use the licensed IP or to the use of IP itself – such as geographic scope, field of use, or quality controls – are more likely to be treated as infringement when breached.

The type of license also matters: An exclusive licensee who is wronged may have both contract and infringement remedies available, while disputes under a nonexclusive license are more likely to be resolved as a contract matter.

7 Ways to Enforce a Licensing Agreement in Texas

A breach does not mean you are without options. Depending on whether the violation constitutes a breach of contract or an infringement, your available remedies in Texas may include:

#1: An Injunction or Other Equitable Remedy

When a licensing agreement is breached, money alone does not always make you whole – particularly when the other party's unauthorized use of your intellectual property is ongoing. In those cases, you may seek an injunction, which is a court order requiring the offending party to stop the infringing conduct.

Courts may also order specific performance, compelling a party to fulfill its obligations under the agreement, when the licensed subject matter is unique, and damages cannot adequately compensate the injured party.

#2: Actual Damages

The most common remedy in a licensing dispute is compensatory damages – money designed to put you in the position you would have been in had the breach never occurred. Depending on the facts, this can include lost profits you would have earned if the agreement were honored, or a reasonable royalty reflecting the value of the unauthorized use. In one Texas case involving a software license, for instance, the court awarded $250,000 in reasonable royalty damages for use beyond the license's scope.

#3: Cancellation of the Agreement

If the breach is material – meaning it strikes at the heart of what you bargained for – you may have the right to terminate the licensing agreement entirely and walk away from your own obligations under it. Review the agreement’s termination provisions for notice periods, cure periods, or procedural steps that must be followed before termination can become effective. Skipping these steps can expose the terminating party to a counterclaim for breach of contract.

If the breach is only partial, however, termination may not be your best option. In that case, you may choose to continue performance under the agreement and sue for damages instead.

An experienced licensing attorney can help you evaluate which path makes more strategic and legal sense given your specific circumstances – because the choice you make can affect the remedies available to you.

#4: Remedies Dictated by the Agreement

Before pursuing any remedy, review your licensing agreement carefully: the agreement itself may control what you can and cannot recover. Texas courts enforce contractual provisions that limit or modify remedies, including caps on damages, exclusions of consequential damages, or restrictions on equitable relief, as long as those limitations are not illegal or against public policy. Conversely, your agreement may also include provisions that work in your favor, such as liquidated damages clauses or attorney's fees provisions.

The bottom line is that the remedies available to you are shaped as much by the contract terms as by they are by law – which is why having the right language in your licensing agreement from the start matters as much as enforcing it later.

If the license itself was infringed, offending parties may face additional consequences:

#5: Statutory Damages

When a licensing dispute involves copyright infringement – not just a breach of the contract – federal law opens the door to statutory damages (predetermined awards set by law). Unlike actual damages, statutory damages do not require you to prove a specific dollar amount of loss. Courts may award between $750 and $30,000 per work, and up to $150,000 per work if the infringement is willful.

This can be a significant advantage when actual losses are difficult to quantify or when the infringer's conduct was egregious. To access statutory damages, the copyright must have been registered before the infringement began.

#6: Attorney’s Fees

Licensing disputes can be costly to litigate, but in certain circumstances, you may be able to recover your attorney's fees from the other side. Under Texas law, a prevailing party in a breach of contract claim – including a licensing agreement – may recover reasonable attorney's fees in addition to the underlying damages.

Attorney's fees are also available to the prevailing party in a copyright infringement case under federal law and to the prevailing party in trademark infringement cases in some circumstances.

#7: Criminal Penalties

In the most serious cases – particularly where willful copyright infringement or trade secret theft is involved – licensing violations can cross the line from civil dispute into criminal conduct. While criminal enforcement is pursued by the government rather than the injured business, the prospect of criminal liability can be a powerful factor in negotiations and civil proceedings alike.

Examples of Licensing Agreement Violations

Licensing agreement disputes do not always involve the licensee doing something wrong. Violations can run in either direction – a licensee may exceed the scope of what it was granted, but a licensor can just as easily breach its own obligations by failing to honor exclusivity, misusing confidential information, or misrepresenting what it was offering in the first place.

Common examples of licensing agreement violations include:

Licensee fails to pay royalties as agreed. A licensee that continues using licensed IP without paying required royalties may face both breach of contract and trade secret misappropriation claims.
Licensed material is used after the license expires. When a license expires, so does the licensee's right to use the IP – and continued use constitutes infringement, not authorized use.
Licensor misrepresented – or failed to disclose – material information of what was being offered under the license. A licensor has a duty to disclose material facts that affect the fundamental viability of what it is offering – and silence can constitute fraud.
Licensed material is used in an unauthorized manner. Using licensed IP in ways the agreement does not permit – copying, distributing, or deploying it beyond the license's defined scope – can elevate a contract dispute into an infringement claim.
Licensor fails to honor exclusive terms of the agreement. An exclusive license carries an implied covenant that the licensor will not compete with or undercut the licensee during the license term.
Licensing partner breaches a technology licensing agreement. When a licensing partner continues using licensed technology after the license is terminated or expires, the conduct can constitute trade secret misappropriation – not merely a breach of contract.
Licensee allows an unauthorized third party to use licensed materials. Transferring licensed rights or operations to a subsidiary or a third party without authorization can constitute both a breach of the licensing agreement and wrongful use of trade secrets.

Fraud and Other Licensing Disputes

Not every licensing dispute comes down to infringement or breach of contract. When deliberate deception is involved – misrepresentations made at the negotiating table, false royalty reports, concealed competing agreements – your case may involve fraud, unfair competition, or tortious interference, expanding the remedies available to you.

Fraudulent Inducement: When You Were Misled into Signing.

Fraudulent inducement occurs when one party uses misrepresentation – false statements of material fact – to persuade the other to enter into a licensing agreement they otherwise would not have signed. Common examples include a licensor overstating the value, exclusivity, or strength of IP rights being licensed, or misrepresenting sales performance, market data, or the rights being conveyed.

The presence of fraud impacts your available legal remedies: Texas courts have made clear that where fraudulent inducement is established, a plaintiff can pursue actual damages and exemplary (punitive) damages beyond what the contract alone would allow.

Fraudulent Royalty Reporting: A Common and Costly Form of Licensing Fraud

One of the most prevalent – and financially damaging – forms of fraud in licensing relationships does not occur at the negotiating table. It occurs in the royalty statements sent month after month, year after year. Fraudulent royalty reporting happens when a licensee deliberately underreports sales, manipulates revenue figures, or misclassifies revenue streams to reduce royalties owed to the licensor.

This type of fraud is especially common in music and entertainment licensing, software and technology licensing, book publishing, and franchise arrangements where the licensor relies entirely on the licensee's self-reported data to calculate royalty payments.

If your licensing agreement includes an audit rights clause – and it should – you have a contractual right to examine the licensee's books and records. A forensic accounting review is often the first step in uncovering systematic underreporting and quantifying the full extent of lost royalties.

Tortious Interference with a Licensing Relationship

Not every licensing dispute involves only the licensor and licensee. Sometimes a third party – a competitor, a former employee, or a business partner – intentionally disrupts a licensing relationship in ways that cause real financial harm. When that happens, Texas law may provide a remedy through a tortious interference claim.

In plain terms, tortious interference occurs when someone outside a contract deliberately interferes with it – making it harder or impossible for one of the parties to perform, inducing a breach, or cutting off access to rights the contract was supposed to guarantee. Both licensors and licensees have standing to bring the claim.

What does tortious interference look like in practice? Texas courts have found it in a range of licensing scenarios:

A licensor sent misleading communications to its own licensee network – including a false claim that a court injunction was already in place – instructing them not to work with a former licensee after the licensing agreement expired.
A landowner physically blocked a utility authority's access to an easement and pipeline covered by a license, preventing the authority from maintaining and operating its infrastructure as the license permitted.
A former employee conspired with others to transfer a valid licensing agreement from his employer to a competitor, causing the original licensor to lose its contractual relationship and suffer damages.
A company asserted overbroad copyright infringement claims to interfere with a licensing and asset purchase agreement that covered products well beyond those actually in dispute.

If your licensing dispute involves a third party whose conduct appears designed to disrupt the relationship, a tortious interference claim may be worth evaluating alongside your breach of contract and infringement options.

Protect Your Rights Under a Licensing Agreement

Attorneys at Hendershot Cowart P.C. have decades of experience representing both licensors and licensees in breach of contract, infringement, fraud, and trade secret disputes across Texas. We will evaluate your agreement, identify the strongest claims and remedies available to you, and help you pursue the outcome that protects your business – whether that means negotiating a resolution or taking the fight to court.

Call (713) 783-3110 or contact us online to schedule a consultation with our licensing agreement attorneys.