Monster sues Beats for severing ties ahead of Apple acquisition

January 6, 2015
San Jose Mercury News

Monster, a Peninsula company known for its audio equipment, filed suit against Beats Electronics on Tuesday, claiming that founders Jimmy Iovine and Dr. Dre conspired to sever the headphones brand from Monster before agreeing to a $3.2 billion acquisition from Apple.

Monster alleges that the company developed Beats' iconic headphones in a partnership with famed producer and rapper Dre and music-industry icon Iovine in 2008, producing a line of Monster headphones known as "Beats by Dr. Dre." According to a complaint filed Tuesday in San Mateo County Superior Court, Beats used a clause in the contract to sever the partnership in 2011 while retaining all rights to the technology.

"Had the partnership expired on its own terms, there would have been no transfer of Monster's 'Beats By Dr. Dre' product line, including all development, engineering, manufacturing, marketing, distributing, and retail rights" the complaint alleges. "Defendants also absconded with Monster's global distribution chain, key retail relationships, and intellectual property."

HTC purchased 51 percent of Beats in 2011, the investment that allowed for a "change of control" of the Beats company formed by Iovine and Dr. Dre. After that ownership switch allowed Beats to escape its contract with Monster, the founders repurchased half that equity from HTC less than a year later.

"At that point, (Iovine and Dre) had improperly acquired a company that had been built in a partnership with Monster," the lawsuit alleges.

Dre and Iovine eventually agreed to sell the company to Apple in 2013 for $3.2 billion, the largest acquisition in the history of the Cupertino tech giant. In addition to keeping Monster from recognizing any of those proceeds, Beats rewrote its history to cover up Monster's contribution amid a wave of publicity, the company's lawsuit states... (To read the entire article, please click HERE)