How to Handle a Music License Breach in Minnesota

What Counts as a Breach of a Music License?

A music license is breached when the licensee fails to do what the license requires: pay royalties, send accurate statements, credit you, or stay within the licensed songs, media, territory, and term. The kind of breach decides whether you have a contract claim, a copyright claim, or both.

Breaches of a music license fall into two groups:

1. Broken promises inside the license. The licensee owes money or conduct it has not delivered: late or missing royalty payments, statements that undercount sales or streams, a missing writer or performer credit, or a failure to submit a use for approval. Disputes over how a royalty is calculated belong here too; my page on gross versus net royalty terms covers that question.
2. Use outside the grant. The licensee does something the license never permitted: puts the recording in a commercial when the license covered a film, sells it in a territory the license excluded, keeps distributing after the term ended, or sublicenses without permission. These uses can reach the exclusive rights the Copyright Act gives you, including the right “(1) to reproduce the copyrighted work in copies or phonorecords” under 17 U.S.C. § 106.

The line between the groups is not always obvious. In Graham v. James, 144 F.3d 229 (2d Cir. 1998), a licensee failed to pay the agreed fee for each release and each copy sold and removed the author’s credit. The Second Circuit, applying New York law, held: “We think that the payment of royalties and the inclusion of a notice crediting James’s authorship are to be considered covenants, not conditions.” It affirmed the contract damages and vacated the infringement award.

When Does a License Breach Become Copyright Infringement?

A license breach becomes copyright infringement when the licensee acts outside the license in a way that uses one of your exclusive rights, such as copying or distributing the music beyond what you granted. Breaking a promise that sits inside the license, like paying late under a payment term that is a covenant rather than a condition, is a contract claim while the license stands.

The Copyright Act defines the infringer as “Anyone who violates any of the exclusive rights of the copyright owner as provided by sections 106 through 122” (17 U.S.C. § 501(a)). A licensee acting within the license is not violating those rights, because you authorized the use. In Graham, the court said that a copyright owner who grants a nonexclusive license to use his work “waives his right to sue the licensee for copyright infringement.”

Courts sort license terms into two kinds. The Ninth Circuit put it this way in MDY Industries, LLC v. Blizzard Entertainment, Inc., 629 F.3d 928 (9th Cir. 2010): “We refer to contractual terms that limit a license’s scope as “conditions,” the breach of which constitute copyright infringement.” It added: “We refer to all other license terms as “covenants,” the breach of which is actionable only under contract law.” The court also required “a nexus between the condition and the licensor’s exclusive rights of copyright” before a broken term counts as infringement. It found no infringement where the conduct “would not violate any of Blizzard’s exclusive rights of copyright,” and those rights reach beyond copying. Under § 106, they include the rights “(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending,” to perform a musical work publicly, and “(6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.”

Which law sorts the terms matters. MDY said: “We distinguish between conditions and covenants according to state contract law, to the extent consistent with federal copyright law and policy.” MDY applied Delaware law and Graham applied New York law, because those were the laws governing the licenses. A music example comes from Fantastic Fakes, Inc. v. Pickwick International, Inc., 661 F.2d 479 (5th Cir. 1981), a license to manufacture and distribute recordings. Applying Georgia rules of construction, the Fifth Circuit agreed that the clause requiring the licensee to place the licensor’s copyright notice on each recording “sets forth a covenant of performance rather than a condition precedent to the license granted to defendant,” and it affirmed summary judgment against the licensor’s infringement counts. I suggest reading your license’s governing-law clause before deciding which claim you have, because that state’s rules decide how each term is classified “to the extent consistent with federal copyright law and policy,” and MDY still requires “a nexus between the condition and the licensor’s exclusive rights of copyright.”

How Does Minnesota Contract Law Treat a Licensee’s Breach?

Under Minnesota law, a licensee that breaks a license term is liable for breach of contract when you prove the contract, your performance of any conditions, and the breach. A licensee’s breach can also excuse your own further performance, and a material breach can justify ending the license.

The Minnesota Supreme Court listed the elements of a contract claim in Lyon Financial Services, Inc. v. Illinois Paper & Copier Co., 848 N.W.2d 539 (Minn. 2014). They are “(1) formation of a contract, (2) performance by plaintiff of any conditions precedent to his right to demand performance by the defendant, and (3) breach of the contract by defendant.” For a licensor, the second element means your own side of the deal matters: if you owed delivery of masters, artwork, or approvals, a licensee may defend by arguing you did not provide them.

The Minnesota Supreme Court applied these rules to a copyright license in 1937. In Associated Cinemas of America, Inc. v. World Amusement Co., 276 N.W. 7 (Minn. 1937), a film distributor licensed a Minneapolis theater to show films “under the respective copyrights” for a guaranteed fee and a share of receipts. The theater refused to run the films unless the price came down. The court agreed that the theater’s letters were a repudiation and repeated that “As a general rule a breach of a contract by one party excuses performance by the other.” It affirmed a recovery computed under the contract’s own terms, noting that “Defendant’s only excuse for nonperformance is that under his contracts he could not “make any money.””

Not every breach ends the license. In Cut Price Super Markets v. Kingpin Foods, Inc., 98 N.W.2d 257 (Minn. 1959), a dispute under a franchise agreement licensing a supermarket trade name, the Minnesota Supreme Court stated that “only a material breach of a contract or a substantial failure in its performance justifies a party thereto in rescinding,” a rule it said appears to be well established. The court added, “It is not every breach of contract which justifies rescission.” It also said that “One wishing to rescind the contract for breach thereof must act promptly,” and that the right to rescind “may be waived by continuing to treat the contract as a subsisting obligation.” The court set a limit for a contract already partly performed: “After one party to a contract has performed a substantial part of it, the other party cannot rescind for default in further performance unless the defaulting party can be placed in status quo, but is limited to an action for damages for the breach.” Among its grounds for affirming, the court found that the licensee “slept on its rights” and “failed to comply with what the law requires; namely, prompt notice of intent to rescind upon the discovery of any claimed breach.”

How Do You Terminate a Music License for Breach?

You terminate a music license for breach by following its termination clause, which may require written notice and a chance to cure, and, under the general rule for contracts, by meeting its conditions, which include a material breach and acting promptly. Termination for breach takes a step by you, such as the written notice the license or a statute requires; in Graham, the court vacated an infringement award because the record did not show that the licensor had rescinded, and it remanded that question.

The termination clause is the first thing to read. A license may say the licensor can terminate if a default continues for a stated period after written notice. My page on terminating a licensing agreement covers termination clauses more broadly.

The second step is a clear act of termination. In Graham, the court assumed the licensee had materially breached and said “such rescission did not occur automatically without” affirmative steps by the licensor. It vacated the infringement award because the record did not show that the licensor had rescinded the license. The licensor there had sued for breach of the license without alleging that he had terminated it. I suggest a written termination notice that names the breach, cites the clause, and states the date the license ends, because that letter is the evidence that every later use was unlicensed.

Federal law supplies its own procedure for one kind of music license. For a compulsory mechanical license to make and distribute recordings of a song, 17 U.S.C. § 115(c)(2)(J) provides that “if the copyright owner does not receive the monthly payment and the monthly and annual statements of account when due, the owner may give written notice to the licensee that, unless the default is remedied not later than 30 days after the date on which the notice is sent, the compulsory license will be automatically terminated.” The statute adds: “Such termination renders either the making or the distribution, or both, of all phonorecords for which the royalty has not been paid, actionable as acts of infringement under section 501 and fully subject to the remedies provided by sections 502 through 506.” The blanket license for digital services in subsection (d) has separate default rules.

What Should a Notice of Breach to a Music Licensee Say?

A notice of breach should identify the license, the term breached, the facts showing the breach, what the licensee must do to cure, and what you will do if it does not. It should go by the method, and to the address, the license’s notice clause names.

A notice that does its job covers these points:

1. The license. The notice should name the agreement, its date, and the songs or recordings it covers.
2. The breach. It should quote the term breached and state the facts: the unpaid statement periods, the amount you calculate is owed, or where and when the unlicensed use appeared. I suggest keeping copies of the statements, screenshots, and links you rely on, because they are your proof if the licensee disputes the facts.
3. The cure. It should state what the licensee must do and by when, using the cure period the license sets.
4. The consequence. It should say that you will terminate under the named clause if the breach is not cured, and that you reserve your contract and copyright claims.
5. Delivery. It should go the way the notice clause requires, such as certified mail or overnight courier, with email as a copy unless the license permits email notice, because a notice sent another way invites the argument that it was never given.

A written notice can also start interest running. Under Minn. Stat. § 549.09, subd. 1, unless a contract or other law provides otherwise, preverdict interest on money damages runs from whichever comes first: the start of the lawsuit, a demand for arbitration, or “the time of a written notice of claim” to the other side. The same subdivision bars preverdict interest, “Except as otherwise provided by contract or allowed by law,” on “(4) judgments or awards not in excess of the amount specified in section 491A.01,” among other awards. The statute sets a condition, quoted here so you can check its current text: “The action must be commenced within two years of a written notice of claim for interest to begin to accrue from the time of the notice of claim.” Written settlement offers exchanged later can limit that interest, because the statute ties the interest award to whose offer came closer to the final result.

What Remedies Can a Licensor Recover?

For a contract breach, you can recover what the license promised you, such as unpaid royalties and fees. For infringement after termination or outside the license, the Copyright Act adds actual damages and the infringer’s profits or statutory damages, injunctions, and possible attorney’s fees. Registration comes before an infringement suit, and under 17 U.S.C. § 412 the timing of registration can bar statutory damages and attorney’s fees for infringement that began before it.

Contract damages put you where the license would have put you. In Graham, the court affirmed contract damages computed at the agreed fee for each release and each copy sold, less what had been paid. Associated Cinemas affirmed a recovery computed under the license’s own damages terms. Where a licensor recovers on both theories for the same use, Graham noted that “any contract damages representing actual copyright damages would have to be subtracted from the final copyright award to avoid double recovery.”

The Copyright Act’s remedies for infringement are:

1. Actual damages and profits. Under 17 U.S.C. § 504(b), “The copyright owner is entitled to recover the actual damages suffered by him or her as a result of the infringement, and any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages.”
2. Statutory damages. Instead, “the copyright owner may elect, at any time before final judgment is rendered, to recover, instead of actual damages and profits, an award of statutory damages for all infringements involved in the action,” per work, “in a sum of not less than $750 or more than $30,000 as the court considers just.” The statute adds: “For the purposes of this subsection, all the parts of a compilation or derivative work constitute one work.” For willful infringement, “the court in its discretion may increase the award of statutory damages to a sum of not more than $150,000.” The court may also reduce the award to “a sum of not less than $200” for an infringer that proves it had no reason to believe its acts infringed.
3. Injunctions. A court may “grant temporary and final injunctions on such terms as it may deem reasonable to prevent or restrain infringement of a copyright” (17 U.S.C. § 502(a)). My page on injunctions for breach of IP license terms covers that remedy.
4. Costs and attorney’s fees. Under 17 U.S.C. § 505, “the court may also award a reasonable attorney’s fee to the prevailing party as part of the costs.”

Registration affects these remedies in two ways:

1. Filing suit. Under 17 U.S.C. § 411(a), “no civil action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title.” In Fourth Estate Public Benefit Corp. v. Wall-Street.com, LLC, 586 U.S. 296 (2019), the Supreme Court held that registration occurs when the Copyright Office registers the copyright, not when the application is filed. If the Office refuses registration after the deposit, application, and fee required for registration have been delivered in proper form, the applicant may still sue by serving notice and a copy of the complaint on the Register of Copyrights.
2. Statutory damages and fees. Under 17 U.S.C. § 412, “no award of statutory damages or of attorney’s fees, as provided by sections 504 and 505, shall be made for” infringement of an unpublished work that began before its registration. For a published work, the bar reaches, in words quoted here so you can check the current text, “(2) any infringement of copyright commenced after first publication of the work and before the effective date of its registration, unless such registration is made within three months after the first publication of the work.” Among its exceptions, quoted so you can check the current text, the bar does not apply to “an action for infringement of the copyright of a work that has been preregistered under section 408(f) before the commencement of the infringement and that has an effective date of registration not later than the earlier of 3 months after the first publication of the work or 1 month after the copyright owner has learned of the infringement.”

For a sound recording fixed before February 15, 1972, see 17 U.S.C. § 1401.

My page on registering a copyright explains the process. Section 505 applies to “any civil action under this title,” so if you want fees on the contract claim as well, the license should include a fee clause.

Which Court Hears a Music License Dispute?

A claim for unpaid royalties or another broken license promise can be heard in Minnesota state court, but a copyright infringement claim belongs only in federal court. A federal court hearing the infringement claim can also hear the related contract claim. If the license has an arbitration clause, Minn. Stat. § 572B.06 provides that such an agreement “is valid, enforceable, and irrevocable except upon a ground that exists at law or in equity for the revocation of contract.”

Federal law draws the line. Under 28 U.S.C. § 1338(a), “No State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents, plant variety protection, or copyrights.” Under 28 U.S.C. § 1367(a), a federal court with an infringement claim has “supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.” For a contract claim alone, Minn. Stat. § 555.02 lets “Any person interested under a deed, will, written contract, or other writings constituting a contract” obtain “a declaration of rights, status, or other legal relations thereunder,” which can settle whether a license was validly terminated.

A contract claim must be more than a copyright claim in disguise. The Copyright Act leaves state law in place for “activities violating legal or equitable rights that are not equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106” (17 U.S.C. § 301(b)). In National Car Rental System, Inc. v. Computer Associates International, Inc., 991 F.2d 426 (8th Cir. 1993), the federal appeals court covering Minnesota considered a software licensor’s claim that its licensee, which ran the programs in Bloomington, used them to process data for third parties against the license’s use restriction. The court held the claim was not preempted, reasoning: “Absent the parties’ agreement, this restriction would not exist.” The court distinguished a decision that stood “at most for the proposition that a breach of contract claim alleging nothing more than an act of infringement is preempted.”

A smaller federal option exists. The Copyright Claims Board, created by 17 U.S.C. § 1504, hears infringement claims brought by “the legal or beneficial owner of the exclusive right at the time of the infringement” and decides them without a federal lawsuit. Participation is voluntary under subsection (a), so a licensee can decline. Total recovery in one proceeding cannot exceed $30,000, apart from fees awarded for bad-faith conduct, under subsection (e)(1)(D). Federal law also limits how long an infringement claim may wait (17 U.S.C. § 507(b)), and contract claims have their own limitations periods, so I suggest checking both as soon as a breach appears, because a missed deadline ends the claim. If you would rather resolve the dispute by agreement, my page on settling an infringement claim covers that path.

How Does Minnesota Regulate Performing Rights Society Licenses?

Minnesota regulates how a performing rights society such as ASCAP, BMI, or SESAC licenses a proprietor, such as a bar, restaurant, or store located in Minnesota where the public may assemble, to play music. A royalty contract between a proprietor and a society executed in this state must be written and signed, and the society may not collect royalties from a proprietor it has licensed except as that contract provides.

The statute reaches a “Performing rights society,” defined in Minn. Stat. § 325E.50, subd. 3, as “an association, corporation, or other entity that licenses the public performance of nondramatic musical works on behalf of copyright owners, such as the American Society of Composers, Authors, and Publishers (ASCAP); Broadcast Music, Inc. (BMI); and SESAC, Inc.” It protects a “Proprietor,” defined in subdivision 4 as “the owner of a retail establishment, office, restaurant, inn, bar, tavern, or any other similar establishment or place of business located in this state in which the public may assemble and in which nondramatic musical works may be performed, broadcast, or otherwise transmitted.” Its rules are:

1. Disclosure before signing. Under Minn. Stat. § 325E.51, “No performing rights society shall enter into, or offer to enter into, a contract for the payment of royalties by a proprietor unless at the time of the offer, or any time thereafter, but no later than 72 hours prior to the execution of that contract, it provides to the proprietor, in writing, the following” disclosures. The list begins with “(1) a schedule of the rates and terms of royalties under the contract.”
2. A written, signed contract. Under Minn. Stat. § 325E.52, “Every contract for the payment of royalties between a proprietor and a performing rights society executed in this state must be in writing and signed by the parties and must include, at a minimum, the following information” terms. The list includes “(3) the duration of the contract” and the rate schedule.
3. Collection only under that contract. Under Minn. Stat. § 325E.53, a society may not “(1) collect, or attempt to collect, from a proprietor licensed by that performing rights society, a royalty payment except as provided in a contract executed pursuant to sections 325E.50 to 325E.57.”
4. Investigations still allowed. Minn. Stat. § 325E.54 provides that nothing in these sections prohibits a society “from conducting investigations to determine the existence of music use by a proprietor or informing a proprietor of the proprietor’s obligation under the federal copyright law, United States Code, title 17.”
5. A remedy for violations. Under Minn. Stat. § 325E.55, “A person who suffers a violation of sections 325E.50 to 325E.57 may bring an action to recover actual damages and reasonable attorney’s fees and seek an injunction or any other available remedy.” Minn. Stat. § 325E.56 makes these remedies “in addition to and cumulative of any other right, remedy, or prohibition accorded by common law, or state or federal law.”

The statute has exceptions. Under Minn. Stat. § 325E.57, the sections “do not apply to contracts between copyright owners or performing rights societies and broadcasters licensed by the Federal Communications Commission, or to contracts with cable operators, programmers, or other transmission services.” They also exclude “musical works performed in synchronization with an audio/visual film or tape” from coverage. For a songwriter or publisher, this means a society licensing your works to a Minnesota proprietor under a contract executed in this state must meet these rules, while a license you grant directly, without a society, falls outside sections 325E.51 to 325E.53, which govern performing rights societies.

How Can a Music License Be Drafted to Make Breaches Easier to Fix?

A music license should state which obligations are conditions of the grant, require regular royalty statements with audit rights, set a notice, cure, and termination procedure, say what happens to the rights at termination, and name the governing law. Each of these terms answers a question that the cases above left to a court.

These are the terms I suggest checking in any license you grant:

1. Express conditions. Graham quoted a definition of a condition as “any fact or event which qualifies a duty to perform,” and it noted that New York presumes contract terms are covenants rather than conditions. If staying within the licensed media, territory, and term, or paying an advance, is meant to be a condition of the license, the license should say the grant is conditioned on it, because under a presumption like New York’s an unclear term is read as a promise.
2. Statements and audits. The license should set when statements are due, what they must show, and your right to inspect the licensee’s books, because underpayment is hard to prove from the licensee’s own summary.
3. Minimum payments. An advance or minimum royalty gives you money even if the licensee does little with the music; my page on minimum royalty clauses covers the risks.
4. Notice, cure, and termination. The license should name the notice method and address, the cure period, and the defaults that allow termination, because, in the words of Cut Price, “It is not every breach of contract which justifies rescission.”
5. What happens at the end. The license should say that all rights revert to you on termination, whether the licensee may sell off existing inventory, and that use after termination is unlicensed. My page on reversion of rights covers that clause.
6. Governing law, forum, and fees. The license should name the governing law and court and include a fee clause for contract claims, because, as MDY and Graham show, the governing law decides how each term is classified, to the extent consistent with federal copyright law and policy.

The same gaps appear outside music. In a royalty agreement I marked up for a designer, the company’s draft took the design rights at signing but did not require the company to bring the product to market, while the royalties began only with the first sale. I added a reasonable-efforts clause, milestone payments, and a return of the rights if commercialization stalled, so the licensor would not be left with no rights and no royalties.

Next Steps When a Licensee Breaches

When a licensee breaches a music license, four steps protect your position. The first is reading the license to classify the breach and find the governing law, and the second is a written notice sent by the method the license requires. The third, if the breach is uncured and the license terms and governing law allow it, is a prompt, clear termination, and the fourth is registering the copyright before any infringement claim. State contract law classifies the license terms, and federal law governs infringement and the court that hears it.

For other Minnesota agreements, my contracts practice page covers how I handle contract disputes. If a licensee has stopped paying or is using your music outside the license, email [email protected] with a brief description of the problem. I start with an intake and conflict check before you send confidential documents, and the license and royalty statements should be shared only through a secure upload method after intake. I can tell you whether the breach supports termination, which claims it supports, and what your notice should say.