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Apple’s Beats faces Monster lawsuit over ‘sham’ sale

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Beats

Beats Electronics, one of Apple’s most high profile acquisitions, is now facing a lawsuit from rival audio firm Monster.

According to Monster, Beats’ cofounders Dr. Dre and Jimmy Iovine are guilty of fraud for stealing the Beats headphone design.

Beats’ original headphones were designed by Monster, but Monster claims Dre et al stole the designs and sold them in a ‘sham’ transaction to HTC.

Back in 2011, exactly 51 per cent of Beats Electronics were sold to HTC for $300 million.

Fast forward to 2013 and both Iovine and Dre had repurchased a controlling stake in Beats, changing ownership and cutting all ties with Monster.

Monster’s CEO Noel Lee reduced his stake in Beats to zero, just shy of a year before Apple picked up Beats for a hefty $3 billion – of which Monster saw exactly zilch.

Lee filed the suit with San Mateo County, California’s Superior Court, claiming millions of dollars invested in Beats were lost during the HTC sale.

If Lee had not dropped his stake from 5 per cent, to 1.5 per cent, and then to zero, he would have rights to $100 million worth of Beats shares following the Apple acquisition.

The Monster boss also claims Beats effectively hid his work on Beats, with the audio firm instead crediting Dre for the popular headphone design.

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Interestingly, Lee already spoke out about the Apple Beats takeover as it was proposed, and sounded fairly amicable, if not a little bitter.

“We are very excited for our friends at Beats to have achieved such an incredible valuation from the company Monster started,” said Lee, in a statement sent to TrustedReviews last March.

“For the first 5 years, until 2013, Monster was Beats, having developed engineered, and distrubted all of the Beats products. We wish we could have partnered with companies like Apple and enjoyed some of the fruits of our labour, but our license with Beats ended with the purchase of Beats by HTC.”

How will that last bit fly in court, we wonder?

RJ

January 7, 2015, 12:58 pm

The lawyers will all win...

Jmac

January 20, 2015, 8:50 am

Sour grapes. Lee / Monster won't get anything out of this as they don't have a legal leg to stand on - as Lee himself says "our license with Beats ended". QED. They're probably hoping for a cash windfall to settle, but with Apple's legal and financial might behind it, I doubt Beats will be spooked by a spot of vexatious litigation.

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