Dr. Dre, Jimmy Iovine slapped with $25 million verdict in Beats royalty suit

Steven Lamar, a former business partner of Beats Electronics founders Dr. Dre and Jimmy Iovine, has been awarded a $25 million verdict in a lawsuit against his former associates involving royalties for Beats headphones.

According to the Hollywood Reporter, the jury in the lawsuit, first brought by Lamar in 2014, determined that Lamar fulfilled his contract and is therefore entitled to royalties from the sale of three Beats headphone models.

In the suit, Lamar claimed that a headphone brand endorsed by celebrities was his idea, and that he brought the opportunity to Dre and Iovine in 2006. Beats' founding, as made clear in the suit, was influenced by Apple even before it bought Beats in 2014; Robert Brunner, the former Apple director of industrial design who later joined design firm Pentagram, was involved in initial talks, as was Apple retail VP Jerry McDougal.

Beats by Dre ultimately elected to distribute its headphones through an agreement with Monster. The partners, after a falling out, reached a settlement under which 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 cede intellectual property rights 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."

Lamar's lawsuit was about how much Dre and Iovine owed in royalties, including profits gleaned from Apple's $3 billion acquisition of Beats in 2014.

Lamar sought more than $100 million for his contributions to the brand. The defendants, both of whom testified at the trial, had argued that Lamar was only entitled to royalties from one headphone model, the Beats Studio. A jury ultimately found Lamar was entitled to $25,247,350 in royalties related to three models, the Studio 2 Remastered, the Studio 2 Wireless and the Studio 3.

In a related case, Apple filed a countersuit against Lamar, also in 2014, for claiming "cofounder" status in Beats in order to launch his own headphone brands, during a period when new headphone brands were launching on a regular basis. That suit was dismissed in 2015.

The Lamar case is not the only suit concerning Beats and its founders. Monster Products, Beats' original manufacturing partner, sued Beats and Apple in early 2015. That suit is ongoing.

Monster last week detailed its latest Hail Mary, the launch of a cryptocurrency offering called Monster Money.

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7 Comments

MacPro 18 Years · 19845 comments

About 6 years ago

I suspect they can afford it.

IreneW 7 Years · 307 comments

"receive a 20 percent royalty on gross sales"
Seriously? That is crazy money...

nunzy 6 Years · 662 comments

Monster better stop it's lawsuit, or it will get Appled. Just ask Samsung.

zoetmb 17 Years · 2655 comments

nunzy said:

Monster better stop it's lawsuit, or it will get Appled. Just ask Samsung.

Reading the AI article about the lawsuit, it seems to me that there must have been outright incompetence in writing the contract that Monster had with Beats. If there was a clear contract, there's no way that Dre et al could have walked away with the company. And I don't see what Apple has to do with it in any case. It's funny because what Dre is accused of doing is very similar to what Jack Warner did to get his brothers out of Warner Bros.

We'll never know because Apple doesn't break out numbers, but I don't see how this could have been a good acquisition for Apple in terms of return on investment. Apple would have done far better, if they were going to acquire a headphone company at all instead of developing a line themselves, of going after Grado, which they probably could have gotten for pocket change, or even Sennheiser. Personally, I think the Beats headphones have awful audio quality, but obviously a lot of people like them. Unfortunately, if Apple decided to sell Beats, it's unlikely they'd get anything even close to what they paid.

Rayz2016 8 Years · 6957 comments

zoetmb said:

nunzy said:

Monster better stop it's lawsuit, or it will get Appled. Just ask Samsung.

We'll never know because Apple doesn't break out numbers, but I don't see how this could have been a good acquisition for Apple in terms of return on investment. Apple would have done far better, if they were going to acquire a headphone company at all instead of developing a line themselves, of going after Grado, which they probably could have gotten for pocket change, or even Sennheiser. Personally, I think the Beats headphones have awful audio quality, but obviously a lot of people like them. Unfortunately, if Apple decided to sell Beats, it's unlikely they'd get anything even close to what they paid.

And of course, you have the numbers and/or evidence to back any of this up. No? Thought not.

Beats was making a billion a year in headphone sales when Apple bought the company in 2014, so its more than likely that they’ve already got back the 3billion they paid. In addition to a line of headphones that the cool kids are still buying (anecdotal: at my gym, pretty much all the members use a set of wireless beats of some description), they picked up a streaming service that gave them a running start into the market, and Iovine’s expertise and contacts in the music industry, which has helped the company land some exclusive launch deals.

I own a pair of PowerBeats and the audio quality is perfect for workouts and running. Best pair of gym headphones I’ve ever had.