IP License Disputes: Unpaid License Fees, Audits, and Use Outside the License

Last updated: October 2026

An intellectual property license is a contract that lets someone else use your software, brand, content, technology, or data within defined limits, for a fee. Licensees stop paying, underreport, or use the property beyond the territory, field, or term they bargained for. When that happens the licensor has two kinds of claims: breach of the contract, and, where the use exceeds the license, infringement. Kolmogorov Law, P.C. litigates license disputes for licensors and licensees in Orange County, Los Angeles, and California federal court, including disputes with foreign counterparties.

Call (909) 235-6116 or contact us online to discuss a license that is not being honored.

The disputes that come through the door

A software company licenses its platform to a reseller for one country, and discovers the reseller selling worldwide. A brand owner licenses its name for one product category and finds it on another. A licensee owes a seven-figure fee triggered by use outside the United States and refuses to pay it. A content licensor's royalty statements do not match the licensee's public sales figures. A licensee keeps using the technology after termination.

These are contract cases with an IP overlay. The contract sets the scope and the price. Using the property outside the scope is not only a breach; it is use without permission, which is what infringement means.

Read the license first, all of it

Every license fight turns on definitions. Territory. Field of use. Net sales. Affiliate. Term. A dispute about whether a licensee's parent company in another country is covered by a United States license is a dispute about the defined word Affiliate. A royalty dispute is usually a dispute about the deductions allowed from Net sales. We start by mapping the licensee's actual conduct against each defined term before deciding which claims to bring.

Three other clauses decide the strategy: the audit clause, the termination clause, and the dispute resolution clause. Many licenses send disputes to arbitration or to a foreign forum, which changes everything about how the case is brought. See our pages on forum selection clauses and motions to compel arbitration.

Unpaid fees and royalties

An unpaid fixed license fee is a breach of contract claim for a sum certain, and it moves like a collection case. Unpaid royalties are harder because the amount depends on the licensee's numbers. The audit clause is the tool: a well-drafted one gives the licensor the right to inspect the licensee's books, often with fee-shifting if the underpayment exceeds a threshold. A licensee who refuses an audit has usually told you what the audit would show.

Interest and attorney fees follow the contract. A fee clause is reciprocal under California law, so the party that prevails on the contract claim recovers fees whichever side the clause names. Our breach of contract page covers damages and remedies.

Use outside the license

Use beyond the licensed territory, field, product, or term is where the IP claims arise. A copyright licensee that exceeds the scope of its license infringes the copyright as to the excess use. A trademark licensee that sells outside the permitted channels or after termination infringes the mark. Those claims carry the federal remedies described on our IP litigation page, including injunctions and, for registered works and marks, statutory damages and fee-shifting in appropriate cases.

The strategic consequence is that an out-of-scope licensee faces two cases at once: a contract claim for the fee it should have paid, and an infringement claim it cannot defend by pointing to the license.

Termination and what happens after

Most licenses let the licensor terminate for nonpayment after notice and a cure period. Follow the clause exactly; a termination that skips a step gives the licensee a wrongful termination counterclaim. After termination, continued use is infringement, and a temporary restraining order or preliminary injunction is often available to stop it, because the harm to the brand or the market is hard to measure in money.

Licensees have claims too

I represent licensees as well. A licensor that fails to deliver updates, that licenses the same exclusive rights to a competitor, that terminates without following the cure procedure, or that interferes with the licensee's customers has breached the license. Licensees also face overreaching audits and inflated royalty claims; the contract's definitions are the defense.

Foreign counterparties

License disputes cross borders constantly: a Hong Kong licensor and a Los Angeles licensee, an Osaka manufacturer and a California distributor, a European platform and an Irvine software company. Which law governs. Where the case is heard. How a foreign party is served. Whether a judgment can be enforced abroad. All of that has to be answered before the first filing. See our page on international business disputes. Where the licensed property includes confidential technology, the trade secret claims apply as well.

Where license cases are heard

A license dispute pleaded purely as a contract claim can be filed in the Superior Court: the Central Justice Center in Santa Ana for Orange County, the Stanley Mosk Courthouse for Los Angeles. Once copyright infringement is pleaded, the case belongs in federal court, usually the Central District of California in Santa Ana or Los Angeles. Trademark claims can go either way. Arbitration clauses send the whole dispute to AAA, JAMS, or an international forum.

What to bring to the first meeting

Bring the license with every amendment and schedule, the royalty reports or invoices, and the payment history. Add the correspondence about the dispute and the registrations for the licensed marks or works. Then bring whatever shows the out-of-scope use: screenshots, product listings, customer reports, sales data. If the license has an audit right, bring any audit demand and response.

Frequently asked questions

Is using licensed IP outside the territory a breach of contract or infringement?

Both. It breaches the license, and because the license does not authorize the use, it is also use without permission, which is infringement of the copyright or trademark involved.

Can I sue a licensee that stops paying license fees?

Yes. An unpaid fixed fee is a breach of contract claim for a sum certain. Unpaid royalties usually require an audit first, under the license's audit clause, to establish the amount.

What if the license requires arbitration or a foreign court?

Those clauses are generally enforced. A dispute that belongs in arbitration is brought by petition to compel arbitration; a foreign forum clause is enforced by motion. The strategy changes, but the claims do not disappear.

Can I stop a former licensee from using my brand after termination?

Usually yes. Post-termination use is infringement, and courts grant injunctions where continued use harms the brand in ways damages cannot repair.

What damages can a licensor recover?

The unpaid fees or royalties with interest, consequential damages the contract allows, and attorney fees under a fee clause. For out-of-scope use, the infringement remedies available for the work or mark apply as well, which can include the infringer's profits and statutory damages where registration requirements are met.

Talk to a California intellectual property litigation attorney

If a license is being ignored, underpaid, or exceeded, call (909) 235-6116 or contact us online. Kolmogorov Law, P.C. is at 327 Magnet, Irvine, CA 92618, and represents licensors and licensees in Orange County, Los Angeles, and throughout California. See also our IP litigation page.

This page provides general information about California and federal law and is not legal advice. Outcomes depend on the license terms, the registrations, the conduct, and the forum.