Monster has filed suit against Beats By Dre co-founders Dr. Dre and Jimmy Iovine. The audio cable and headphones company alleges it was “betrayed” and “defrauded” by Dre and Iovine when the two companies parted ways in 2012.
In 2011, several years before its deal with Apple, HTC purchased 51% of Beats, netting Dre and Iovine $100 million each. They split just one year later, apparently over financial disagreements, though publicly it was amicable. It’s that deal that is the center of this suit, as it forced Monster to sell its own stake in Beats. When Dre and Iovine bought their shares back from HTC, Monster was cut out entirely. This, alleges the suit, was a fraudulent transaction.
At the time, the deal originally worked out between Monster, Dre, and Iovine was widely viewed as unfair. As Gizmodo reported in 2013, Monster CEO Noel Lee was so desperate to sign something that he ended up with a deal which meant Dre and Iovine “would retain permanent ownership of everything that Monster developed,” from headphones to remotes to any “piece of metal or plastic associated with Beats By Dre.” Monster, meanwhile, would handle all production and distribution, while Dre and Iovine used industry contacts to make Beats a trend.
In the suit, Lee claims that it was his company that was responsible for all the audio engineering behind Beats, including the design. He also contends Dre’s “main contribution was to bless Monster’s headphones when he exclaimed: ‘That’s the shit!'”
The trick here is whether or not Beats by Dre actually did anything illegal, or if Monster was just so desperate for a big deal that they jumped at a bad contract. We’ll find out when the San Mateo County Superior Court takes on the case.
