Audio equipment maker Monster LLC is suing Beats Electronics LLC, owned by Apple Inc, for what they claim as “fraud and deceit”. The allegations are rooted in the way that Beats acquired control of the rights to the wildly popular Beats by Dr. Dre headphones.
Monster and Beats developed Beats by Dr. Dre in a partnership that began in 2009, but according to the suit filed in San Mateo (Calif.) County Superior Court on Tuesday, Monster was unfairly cut out before Beats was sold to Apple last year. Monster claims that the defendants fraudulently acquired the Beats By Dr. Dre product line including all development, engineering, manufacturing, marketing, distributing and retail rights, via a “sham” transaction with HTC, according to the complaint.
The complaint names Beats co-founders Jimmy Iovine (co-founder of Interscope Records) and Dr. Dre, among others, as defendants. The suit charges that the Beats co-founders concealed the role of Monster and its CEO, Noel Lee, in designing and engineering the headphone line. They also received uncredited training in engineering, manufacturing, distributing and selling the headphones.
After severing ties with Monster, Beats was purchased by Apple for $3 billion. Monster claims it has lost millions from its investment in the rise of Beats, while had Lee retained his original 5% interest in Beats, his total stake in the Beats-Apple deal would have been worth over $100 million, the suit alleges.