Monster, an audio technology company, which co-designed the original Beats by Dr Dre headphones, filed a lawsuit against Apple Beats electronics over allegations of fraud. Monster CEO Noel Lee claims he and Monster invented the technology behind Beats by Dr Dre headphones and claims Lovine and Dr Dre committed fraud by pirating the technology from Monster. This was done with a “change of control” clause when Taiwanese phone maker HTC acquired a 51 percent stake in Beats in 2011, depriving the company of hundreds of millions of dollars.
Monster called it a “Sham” transaction and the lawsuit asserts that the Brisbane, Calif-based company lost millions of dollars. Noel Lee, Monster CEO and co-plaintiff, said that he was persuaded to reduce his 5 percent stake in the company in 2012 out of lack of transparency concerns related to the HTC deal. He was later persuaded to sell his remaining 1.25 percent stake back to Beats for $5.5 million, according to the complaint, which said Lee’s original 5 percent stake would have been worth more than $100 million after the Apple acquisition was announced. The suit was filed in San Mateo (Calif.) County Superior Court. Lee was highly responsible for designing and engineering the headphone line, as well as educating them about engineering, manufacturing, distributing and selling, as the story revealed.
Beats was established in 2008 by Dre and Lovine, a longtime music industry executive. Beats headphones were always hyper-hyped and critics profess it all being celebrity endorsement and very little substance. But the sensational branding and big-name partnerships have reverberated with mainstream consumers, with Beats holding the biggest share of the headphone market despite the high prices of its products, which start at around $99 for earbuds and go all the way up to $450 for pro-grade over-the-ear headphones.
Apple acquired the Beats for $3 billion, representing a huge windfall for Lovine and Dre, but nothing for Lee and Monster. Apple’s purchase of Beats was it’s largest-ever acquisition. The Financial Times reported that it would bundle Beats’ music-streaming service into its iOS operating system from early this year. The lawsuit, which also names two other Beats executives and HTC as defendants, seeks unstated penal damages. Apple, however, declined to comment on the lawsuit.
When people thought that Apple’s acquisition of Beats would be the last big news for the audio accessory and streaming company, Beats settled the lawsuit filed by Steven Lamar claiming that he first took the idea of celebrity-endorsed headphones to Universal exec Jimmy Lovine back in 2006, with the latter bringing Dr Dre into the equation and now one more by Monster. Why the suit is happening only now is anybody’s guess but it comes just months after consumer tech giant Apple bought headphone maker and streaming platform Beats from Dr Dre and Lovine.