The founders of Beats Electronics, Dr Dre and Jimmy Iovine, are being sued by a former business partner who co-designed the high priced audio range, that was recently bought by Apple for $3bn (£1.9bn). Noel Lee’s firm Monster, is understood to have played a key role in creating the original Beats headphones. He has filed a legal complaint in California making the claim that he “lost millions” after being tricked into severing ties with Beats through a “fraudulent” deal that occurred shortly before the sale.
Dr Dre, real name Andre Young, is a music producer and entrepreneur. Mr Iovine was the co-founder of rap label Interscope Records. The label now represents a diverse selection of artists including pop queen Madonna.
In the complaint Noel Lee claims that his 1979 founded firm, Monster Cable, was responsible for instructing Dr Dre and Mr Iovine in the manufacturing and distribution of their headphone line. The lawsuit alleges that Dr Dre’s “primary contribution” to Beats technology “was to bless Monster’s headphones when he made the exclamation, ‘That’s the sh*t!’”
Although Monster remained the exclusive manufacturer of Beats By Dr Dre audio equipment for a number of years, the brand’s success was evidently sealed by Dr Dre’s endorsement. This included the headphones being seen to be worn by numerous celebrities.
When Beats went to market in 2008 it created a new high-end headphones market and within five years was worth $1bn annually. Back in 2012, Beats was sold to Taiwanese mobile phone manufacturer HTC. The deal reportedly gave Dr Dre and Mr Iovine $100m each. Noel Lee claims the deal obliged him to cut his five per cent stake in the firm to 1.25 per cent. In 2013r he sold his remaining stake for $5.5m.
The lawsuit alleges Beats quickly bought back 25.5 per cent of its own shares from HTC. It is this deal that Mr Lee says, was “a sham” designed to cut his firm out of Beats’ success. He has made the claim that his 1.25 per cent stake would have been worth more than $30m in last year’s $3bn sale to technology giant Apple. His original five per cent stake would have made him $150m.
It is understood that Dr Dre is to have earned around $650m (before taxes) last year. Cotchett, Pitre & McCarthy, Monster’s law firm, said in a statement that Dr Dre and Mr Iovine “made millions off the work of Monster and Lee, while the plaintiffs lost millions”.
Since Apple acquired Beats last May, the firm has also been confronted with another lawsuit from the Bose Corporation over their patented noise-cancellation technology. The suit was settled privately in October 2014. Dr Dre and Mr Iovine are also currently being sued for bad faith by entrepreneur David Hyman, who sold his music streaming service, MOG, to Beats back in 2012.
[Image via gadgetsinfoavailable]