Business News Legal

Self-proclaimed ‘father of Beats’ sues headphone firm

By Chris Cooke | Published on Wednesday 21 May 2014

“Where there’s a hit there’s a writ” music lawyers always used to say. So, erm, “where there’s a mega-bucks tech deal conversation, expect plenty of new litigation”. No, that doesn’t work, does it? “Start-up gets bought, see you court”. That’ll do.

So, yes, as the much mooted acquisition of the Beats company by Apple Inc goes through the deal making motions, litigation against the cans and streaming plans business is mounting up.

Following the news that the founder of MOG, the streaming service Beats bought and later morphed into Beats Music, was suing the firm, claiming he was pushed out of his job there prematurely in a bid to avoid equity commitments, now there’s a new lawsuit from the man who claims to have devised the original Beats business plan.

According to a Billboard report, one time hedge-fund manager Steven Lamar claims he first took the idea of celebrity-endorsed headphones to Universal exec Jimmy Iovine back in 2006, with the latter bringing Dr Dre into the equation. Lamar says that, via his businesses SLS International and Jibe Audio, he then put together a consortium of companies to make the project happen, including Pentagram who designed the initial product and a Chinese company who would handle manufacture.

The whole venture quickly went legal though, after Iovine and Dre accused the other partners in the project of failing to meet contractual commitments and of plotting to bring out their own Beats headphones without Dre’s involvement. That dispute was settled out of court, with the early partners in the business – ie Pentagram and Lamar’s companies – being offered a 4% royalty payment on the sale of certain Beats headphones.

The Beats company subsequently partnered with tech firm Monster Inc and turned what was allegedly Lamar’s original idea into the company Apple is now rumoured to be offering $3.2 billion to buy.

And all went quiet on the Pentagram/Lamar front until earlier this year, when an accountancy firm called Hinrichs & Associates, which has seemingly been assigned Pentagram’s rights to its Beats royalties, filed a new lawsuit. That litigation centred on which headphones Beats was obliged to pay royalties on, with H&A stating that Lamar reckoned the royalty should also be due on later headphones that were “substantially similar” to those originally designed by Pentagram.

Though Lamar’s new lawsuit is bigger than that, he suing not only Iovine, Dre and Beats, but also his former partners Pentagram, and the main man he dealt with there, Robert Brunner. His litigation alleges that after the original legal agreement between all the founding partners in 2006, Brunner and Pentagram reached a separate arrangement with the Beats business that basically cut him and his company out of the royalty revenue stream.

With that in mind he is suing everyone, for breach of contract and bad faith, with some parties also facing allegations of tortious interference and breach of fiduciary duties. Good times.

Lamar’s lawsuit also reveals that way back at the start he and Iovine were talking to Apple as being the primary seller of the Dre-backed headphones, to the extent that there were discussions about what form packaging should take so they could be stocked in the IT giant’s high street stores. The partnership wasn’t to be, though is kinda interesting in the context of the current Apple/Beats takeover talks.