Beats Electronics is being sued by audio cable company Monster over the technology in Beats By Dr. Dre headphones.
According to reports Beats double crossed former partners to eventually acquire $3 billion dollar partnership with Apple computers.
For audio cable company Monster, the wound that Beats Electronics left is years old but still stings like a fresh stab in the back.
In a lawsuit filed in San Mateo County Superior Court Tuesday, Monster CEO Noel Lee said that his company was betrayed by Beats Electronics, the company behind “Beats By Dr. Dre” headphones, when the two companies parted ways in 2012, and that Beats has gone on to try to erase Monster’s contribution to its headphones.
The suit claims that rapper Andre “ Dr. Dre” Young and music mogul Jimmy Iovine conspired to steal the audio engineering that Monster built for the Beats headphones, which were a joint project. The suit alleges that Monster, not Beats, was primarily responsible for designing the headphones, and after Dre and Iovine severed ties with Monster, they tried to wipe away Monster’s role in Beats’ success. It adds that beyond Dre’s status as a celebrity, his “main contribution was to bless Monster’s headphones when he exclaimed: ‘That’s the shit!’”
“A terrible situation took place that basically robbed Mr. Lee of his invention,” said Lee’s attorney Joe Cotchett.
The two companies once worked together to great success, but their separation has been full of bad blood. The two joined forces in 2008 when Kevin Lee, Noel’s son, flew out to Los Angeles to find partners for the headphone prototypes that Monster was building. He met Jimmy Iovine, the cofounder of Interscope Records, and Iovine, along with Dre, approached Monster, interested in their technology. For years, Monster was the exclusive manufacturer of Beats By Dr. Dre headphones. Monster says it provided all of the audio engineering while Dre and Iovine used their sports and entertainment contacts and influence to get the stylized headphones over the ears of celebrities like Lady Gaga.
Beats By Dr. Dre quickly became a highly visible consumer brand, taking over more than half of the $1 billion U.S. headphone market by 2012. But Monster, which was founded in 1978 and became known for selling expensive video and audio cables, reportedly saw less and less of its success. When the two parties inked a deal to begin making the headphones, Lee and his son were eager to sign anything, having already thought they lost the deal to SLS Audio. The Lees faced off with skilled businessman Iovine, agreed to less-than-favorable terms, according to a 2013 Gizmodo story, and have come to regret it.
The in-depth story of the deal from Gizmodo paints it as a Pyrrhic victory for Monster. “Monster solidified an agreement that got Beats Electronics alive and shipping headphones, but not without gigantic forfeit: Jimmy and Dre’s side of Beats would retain permanent ownership of everything that Monster developed,” wrote reporter Sam Biddle. “Every headphone, every headband, every cup, every driver, every remote control—if there was a piece of metal or plastic associated with Beats By Dre, Noel and Kevin Lee surrendered it to Jimmy and Dre.”
When HTC bought a 51% stake of Beats in 2011, Dre and Iovine pocketed $100 million each, FORBES estimated at the time. By 2012, the two companies decided to split. They said it was amicable, but their relationship had apparently soured over financial disagreements.
The complaint points to the HTC deal as a fraudulent move. The lawsuit says that Dre and Iovine ”orchestrated a sham acquisition by HTC” in order to wrest away control from Monster. HTC eventually sold back all its shares of Beats by 2013.
While Monster was left trying to build a new product to compete with its own creation – and without the technology that Beats retained control of — Beats continued to succeed. In May, Apple bought the company for $3 billion. Thanks to the sale, Dre walked away with an estimated $650 million before taxes in 2014, which rocketed him to the top of FORBES’ highest-earning musicians list for the year.
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