## Facts

- Marvel, successor to rights in Spider-Man and other characters, licensed exploitation rights to ARP Films, Inc. and its principal, Claude S. Hill, under a 1976 agreement.
- The agreement required ARP/Hill to exploit the properties and, in exchange, to (i) pay Marvel specified percentages of gross receipts and (ii) provide records accounting for exploitation.
- By the mid-1980s, disputes arose over performance under the license relationship.
- ARP sued Marvel in 1986 alleging Marvel breached by distributing cartoons on videocassettes despite ARP’s asserted exclusivity and by opposing a proposed ARP stock offering.
- Marvel filed a separate action seeking damages and a declaration that the 1976 agreement had been terminated; the actions were consolidated, with Amerex (an entity aligned with ARP) and Hill included in Marvel’s case.
- Marvel moved for partial summary judgment after discovery, asserting material breaches by ARP/Amerex/Hill including: (i) refusal since March 1987 to provide accounting and to remit Marvel’s share while continuing exploitation, (ii) unauthorized transfers/assignments of rights or obligations, and (iii) dissolution of the ARP contracting entity.

## Issues

1. Whether plaintiffs’ refusal since March 1987 to account for exploitation and to remit Marvel’s contractual share, while continuing exploitation, constituted a material breach as a matter of law.
2. Whether alleged unauthorized transfers/assignments and dissolution of the ARP contracting entity constituted independent material breaches.
3. Whether plaintiffs could justify suspending core payment and accounting duties based on their allegations that Marvel had previously breached the agreement.

## Decision

- The court granted Marvel’s motion for partial summary judgment in substantial part.
- Plaintiffs’ refusal to account and pay since March 1987, coupled with continued exploitation of Marvel properties, was a material breach as a matter of law.
- Marvel was entitled to treat the 1976 agreement as terminated on that basis.
- The nonpayment/nonaccounting breach was dispositive for the termination determination, regardless of remaining disputes concerning assignment/transfer or dissolution.

## Legal Principles

- Under New York contract law, a breach is material when it deprives the non-breaching party of the essential benefit of the bargain.
- In an intellectual property licensing agreement, payment and accounting provisions that define the licensor’s consideration are central obligations; refusal to perform them while continuing to exploit the licensed property constitutes a material breach.
- A party alleging the other side’s breach generally must either terminate and cease performance or continue performance and pursue damages; it may not continue taking the contract’s benefits while unilaterally withholding core counterperformance.
- Summary judgment is appropriate where the relevant facts are undisputed and the materiality of the breach can be resolved as a matter of law.

## Conclusion

The court held that the licensees materially breached the 1976 licensing agreement by continuing to exploit Marvel’s characters while refusing to account and remit Marvel’s share of receipts, entitling Marvel to treat the agreement as terminated and warranting partial summary judgment.


Marvel Ent. Grp., Inc. v. ARP Films, Inc., 684 F. Supp. 818 (S.D.N.Y. 1988)