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Beats Electronics sued by headphones developer over Apple sale "sham"

Audio equipment maker Monster says it was unfairly cut out ahead of Apple deal
A woman holding her mobile phone walks past an advertisement for Beats headphones outREUTERS/Yuya Shino

Reuters -Audio equipment maker Monster has sued Beats Electronics, owned by Apple, over alleged "fraud and deceit" in the way that Beats acquired control of the rights to the wildly successful "Beats by Dr. Dre" headphones.

After forming a partnership in 2008, Monster and Beats developed "Beats by Dr. Dre", a line of colorful, high-end headphones that rival competitorsSkullcandy Inc and Bose Corp.

According to the suit filed in San Mateo California County Superior Court on Tuesday, Monster engineered the success of the headphones and was unfairly cut out before Beats was sold to Apple last year.

In the complaint, Beats co-founders, Interscope Records co-founder Jimmy Iovine and music producer Dr. Dre as well as HTC America Holdings Inc, a unit of Taiwanese smartphone maker HTC Corp among others, were named as defendants.

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The defendants fraudulently acquired Monster's "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.

In 2011, HTC said it would buy a 51 percent stake in Beats for $309 million. Beats bought back half of HTC's interest in the company soon after the transaction, the complaint said.

The complaint alleges the defendants used the change of control as an excuse to end its relationship with Monster in 2012, and that they had made millions off the work of Monster and itsfounder Noel Lee.

The suit alleges Iovine and Dr. Dre "improperly erased" Monster from Beats' history.

Beats was not immediately available for comment.

The complaint did not mention a dollar amount in damages. It seeks general and special damages as well as punitive damages against Beats, HTC and the individuals named.

In May 2014, Apple bought Beats hoping to score points with the music industry and turn Beats Music into a strong competitor to Spotify and other streaming services.

 
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