Tuesday, May 20, 2014, 06:55 pm PT (09:55 pm ET)
Scattershot legal blast from Beats 'cofounder' Steven Lamar reveals Apple is common thread in firm's historyIn leveling claims against Beats, Dr. Dre, Jimmy Iovine and others over royalties, contract issues and similar breaches, former hedge-fund manager and founder of Jibe Audio Steven Lamar reveals a number of ways in which Apple was involved in the beginnings of the headphone maker.
According to the complaint, as first reported by The Hollywood Reporter, Lamar hatched the idea to create a headphone brand backed up by technology and promoted by a prominent artist.
In 2006, when President of SLS International, Lamar spoke with music label Insterscope Geffen A&M Record's chairman Jimmy Iovine about the concept, who suggested the brand be endorsed by Dr. Dre. Lamar and his audio company Jibe then brought on design firm Pentagram to create the headphone's uniquely modern aesthetic.
Pentagram was where Lamar, and by proxy Beats, would have first contact with someone associated with Apple. The Beats account was handled by Pentagram partner and renowned designer Robert Brunner, who served as Apple's Director of Industrial Design from 1989 to 1997. Brunner is known not only for his work, but for hiring Apple's current design chief Jony Ive.
Apple buys Beats
Apple has confirmed it will buy Beats for $3 billion, making it the company's largest acquisition ever. Beats is best known for its premium headphones, but also recently launched a subscription music streaming service that was the key to Apple's interest.
Full coverage of Beats & Apple
At the time, it looked as though Apple would be one of the first Beats Headphones distributors, as Inmon assisted the company in creating specialized packaging suitable for display in brick-and-mortar Apple Stores. As some may recall, popular audio accessories company Monster was ultimately chosen to run distribution for Beats Headphones.
Under the deal, Iovine and Dre would retain ownership of the brand name "Beats by Dr. Dre" and receive a 20 percent royalty on gross sales. Lamar and Jibe would settle for a 5 percent royalty rate and an "equity interest" in Beats for "contributions to the business model, product concepts, brand identity, and iconic designs."
In that same year, Iovine and Dre filed a lawsuit claiming Lamar failed to uphold his end of the bargain and intended to introduce a line of Beats headphones without Dre's branding. A settlement was reached in 2007 which the Beats executives would pay four percent royalty rates on specific headphone models designed by Pentagram and sold by Monster. The terms stipulated that Pentagram and Lamar would split the incoming money.
From there, auditing firm Hinrichs & Associates — now in control of Pentagram's rights — leveled a lawsuit in January claiming Lamar was demanding royalties on derivative versions of Beats headphones.
The action brings us to Lamar's countersuit filed last Friday, which goes after not only Pentagram and Brunner, but Iovine, Dr. Dre and Beats. Lamar is suing all parties for breach of contract, breach of good faith, denial of contract, while other actions are being taken against Brunner and his new firm Ammunition over alleged interference with standing contracts.
Lamar's countersuit comes after rumors that Apple and Beats Electronics are working toward an acquisition deal that could be worth $3.2 billion. The discussions have attracted other legal claims including a $20 million suit leveled by David Hyman, founder and former CEO of streaming music service MOG, which was purchased by Beats in 2012.
On Topic: General
- Samsung earnings disappoint as company blames competition in smartphone space
- Apple said to cut some 200 jobs from Beats as acquisition closing date looms
- Apple order fulfillment ranks first among online retailers with average delivery time of 2.3 days in June
- Xiaomi's Redmi Note allegedly sending user data to China surreptitiously
- Apple promoting savings with back-to-school sales tax holidays in US