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Monster sues Apple's Beats Electronics and its founders because of "sham" acquisition

Co-founded by hip-hop artist Dr. Dre and music executive Jimmy Iovine, Beats Audio is well known for its popular headsets and speakers. In 2014, Apple acquired the headphone arm for $2.5B, and Beats Music (streaming service) for $500M - some of which was paid in stock, which raised some eyebrows.

In July 2014, Beats Electronics was sued by Bose over alleged patent violations, just before closing the deal with the Cupertino giant. Fast forward to January 2015, and we have audio equipment maker Monster filing yet another lawsuit against Apple's Beat Electronics.

In the complaint, Noel Lee, founder and CEO of Monster, accuses Dr. Dre and Jimmy Iovine of causing his company millions in losses. He claims that they fraudulently acquired Beats Headphones in the 2011 deal with HTC, by using a "change of control" clause in the contract, thus severing the partnership in which Monster and Beats had co-developed the headphone line.

"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 states.

Lee describes the "sham" purchase of HTC's remaining shares in 2013 as "corporate betrayal", because he was persuaded to reduce his stock in from five to 1.5 per cent, and then to zero. He alleges that after the Apple acquisition, his 5% would have been worth more than $100 million, indicating that the executive believes he's not been properly compensated.

​The lawsuit involves two other Beats executives, as well as HTC as defendants, and Monster is seeking unspecified punitive damages. Apple declined to comment on the filing.

Source: USAToday

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