Monster sues Apple's Beats, says headphones acquired through 'sham transaction'

Posted:
in General Discussion edited January 2015
Apple's Beats is once again being sued, this time on assertions that cofounders Jimmy Iovine and Dr. Dre committed fraud by stealing the Beats by Dr. Dre headphone lineup from audio company Monster and its CEO Noel Lee -- who claim to have invented the popular headphones -- in a "sham" sale to HTC.



In a complaint lodged with the Superior Court in San Mateo County, Calif., Monster and Lee claim to have lost millions of dollars from its investment in Beats after Iovine and Dre misappropriated the Beats by Dre headphone line through a 2011 sale to Taiwanese handset maker HTC, reports USA Today. HTC is among the defendants listed in Monster's filing.

The suit asserts Beats hid the collective work Monster and Lee put in to the design, manufacture and distribution of the original Beats headphones, then sold 51 percent of the company to HTC for $300 million. Soon after the HTC deal, Iovine and Dre reacquired 25.5 percent of Beats, allowing them to exercise a change of ownership clause that effectively severed ties with Monster, the complaint alleges.

The duo repurchased control of Beats by 2013 and Lee drew down his stake in the company from 5 percent to 1.5 percent, then to nothing. Eight months later, Apple acquired the Beats for $3 billion, representing a huge windfall for Iovine and Dre, but nothing for Lee and Monster.

If Lee kept his 5 percent, it would be worth more than $100 million after the Apple-Beats deal, plaintiffs argue. Monster and Lee are suing for putative damages.

After creating a lucrative niche for itself in the high-end headphone market -- and especially after being bought out by Apple -- Beats has been hit with multiple lawsuits from plaintiffs who claim to have designed the headphones, invented tech used in Beats' device lineup or came up with the idea to sell high-fashion headphones at premium prices.

In September, Beats filed a complaint of its own against Stephen Lamar for using the terms "Beats Electronics Co-Founder" and "co-founder of Beats by Dr. Dre" in advertisements for his latest audio startup ROAM Audio.

Lamar contends he was first to come up with the idea of branding high-end headphones backed by a prominent recording artist. In 2006, Lamar supposedly pitched the business model to Iovine, who in turn suggested Dre be brought in for promotion purposes. Lamar then tasked design studio Pentagram to create a fashion-forward headphone, which ultimately became the original Beats product.

Iovine has asserted quite the opposite in subsequent interviews and speeches, saying Beats' success comes largely from his partnership with Dre, who lends a musical ear to final hardware designs. Little to no mention is made of Lamar, Pentagram, Monster or Lee.

Most recently, Beats settled a lawsuit in October leveled by Bose, which asserted patent infringement of noise-canceling headphone technology.
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Comments

  • Reply 1 of 57
    jonljonl Posts: 210member
    Monster complaining about a "sham" could be the most ironic thing I'll read all year.
  • Reply 2 of 57
    Beats headphones are currently fashionable.

    The Apple Watch is being touted by Cook as fashionable.

    Fashion is fickle.
  • Reply 3 of 57
    Quote:

    Originally Posted by jonl View Post



    Monster complaining about a "sham" could be the most ironic thing I'll read all year.



    Yeah, even Bose has more credibility than Monster.

  • Reply 4 of 57
    Why aren't the Winklevoss Twins also suing for a piece of the action? Oh right, they're still distracted by Bitcoin.
  • Reply 5 of 57
    I can understand Lee's unhappiness with Dre and Iovine misappropriating the sale of Beats to HTC. Maybe they did undervalue the deal.

    But then he did this: "[I]Lee sold his stake in the company from 5 percent to 1.5 percent, then down to nothing[/I]."

    Why did he sell his share in the company? Isn't that his fault?

    Then... "[I]Eight months later, Apple acquired Beats for $3 billion[/I]"

    Hmmmm... doesn't this sound like a bitter man who made a costly mistake?
  • Reply 6 of 57
    If anyone knows a sham when they see it, it's Monster!
  • Reply 7 of 57
    ktappektappe Posts: 808member

    Several of you have already commented on how hilarious that Monster would call anyone else a "sham".

     

    What I'll point out is how ludicrous it is that Monster thinks it will be able to prevail against Apple's legendary legal team. Apple will have them for lunch.

  • Reply 8 of 57
    droidftwdroidftw Posts: 1,009member

    I could see Apple being interested in acquiring Monster's cable line, but this certainly isn't the way to get in Apple's good graces.

  • Reply 9 of 57
    rogifanrogifan Posts: 10,669member
    Beats headphones are currently fashionable.

    The Apple Watch is being touted by Cook as fashionable.

    Fashion is fickle.

    Pardon my French but what the **** does ?Watch have to do with Monster suing Beats?
  • Reply 10 of 57
    solipsismysolipsismy Posts: 5,099member
    Beats headphones are currently fashionable.

    The Apple Watch is being touted by Cook as fashionable.

    Fashion is fickle.

    And your FUD is relentless.

    E\Why even comment on Beats or ?Watch when you have nothing reasoned to say about either? We know you dislike them, as well as Dr. Dre and Tim Cook, so why just recycle the same hate over and over? It does make you come across as trollish when you do.
  • Reply 11 of 57
    jungmarkjungmark Posts: 6,869member
    Bad business deal = not my fault = lawsuit.
  • Reply 12 of 57
    pigybankpigybank Posts: 178member
    I'm going to sue monster for psychological pain due to the nightmares I had where their BS cables actually came to life and turned into monsters that attacked me.
  • Reply 13 of 57

    If I had "invented" Beats phones, I'd probably keep that bit of info to myself.

  • Reply 14 of 57
    slurpyslurpy Posts: 5,317member

    Oh, shut the **** up, Monster. Your products are all over-priced scams. HDMI cabled for $100-$200? Yeah, Beats is now owned by the richest company on the planet, so expectedly you money-grubbing whores are getting excited.  

  • Reply 15 of 57
    aaarrrggghaaarrrgggh Posts: 1,608member
    I will admit I thought it was odd that there were no references to Monster when the Beats deal was announced; I thought they still had a stake in the company.

    BUT, the reality is that Beats of 2014 was purchased by Apple not for their hipster headphones, but for the curated playlists. Many analysts valued the headphone business at under $500MM, which basically makes it sound like Monster came out ok in the end.

    I'm sure they have some reasonable claim though; he should get a few $MM extra given the timing, as should HTC. If they want to fight it out in court, eventually something will happen-- mainly the lawyers getting wealthier.
  • Reply 17 of 57
    mr omr o Posts: 1,046member

    Dr Dre and Iovine are shrewd Business Men. Not Innovators. So, I am a bit left in the dark on how they are going to re-imagine iTunes? Selling exclusive content on iTunes won't do.

     

    Back on topic:

     

    Their Beats headphones might be fashionable right now, but it just isn't working for me.

     

    I am finding them ... monstrous.

  • Reply 18 of 57
    noivadnoivad Posts: 186member
    I never thought this would see the light of day. I heard about this years ago, before Beats became a household name. I heard about the story of the development of the Beats from a sound engineer at a AES show when I commented to him about the lackluster fidelity of Beats. He told me that Monster did do the engineering on the Beats, but they failed to meet some sort of sales quota in a clause that was needed for Dre%u2019s to endorse them. The unit sell-through quota was beyond what could be met, and the rights to the name and product fell into Iovine & Dre%u2019s control.

    The main point of his story was that Dre insisted on the change to the frequency response to favor bass which destroyed the clarity and high end nature of the original monster concept of the product leaving the shell looking high-end but sounding low end (pun not intended).

    The engineer said Monster had been cheated. But still, someone at Monster thought it was a sure things, and Monster did sign the contract with that rights clause. It was obvious that Monster overvalued Dre%u2019s name as a selling feature.

    Now Monster is back with their own version of headphones, which I imagine sound better (I haven%u2019t heard them yet), and probably would have had the Beat%u2019s name if they had met the sales quotas, and might not belong to Apple.

    Was Monster cheated? Yes. But was their loss a possible outcome in the legal contract they signed? Yes. Unfortunately, sour grapes hold no weight in court, and what the losing side calls %u201Ccheating,%u201D the other side calls good business sense.

    I imagine the only reason Lee is suing now is because Beats was sold to Apple, which is a larger cash cow than Beats ever was. Before the sale to Apple Beats%u2019 profitability was in doubt, and had only its brand name to ride on. Although Beats marketing has been a hit, which once again (see Windows 95&98, Office 2007, etc.) proves that you CAN dress up a turd & call it high-end or art or fashion, or whatever.
  • Reply 19 of 57
    dewmedewme Posts: 3,822member

    This sure sounds like a sour grapes reaction to incredibly bad timing on the part of Monster/Lee. I don't understand what part of "...and Lee drew down his stake in the company from 5 percent to 1.5 percent, then to nothing" that the plaintiff does not understand. Kind of like Seattle Computer Products and Microsoft deal around DOS ownership. I guess there's a reason why they don't put windows that open in very tall buildings. Now if we could only find a way to keep them from jumping instead on to lawyers in their desperation to undo their epic failures. Life's lessons can be cruel. Can a fabricated conspiracy claim buy them a do-over? I doubt it, but let's see what the court decides.

  • Reply 20 of 57
    davdav Posts: 102member

    I have a hard time believing anything Monster has to say after this...

    http://www.bluejeanscable.com/legal/mcp/

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