Dr. Dre and Jimmy Iovine Being Sued By Beats Headphones Co-Founder
Posted by Joseph Lee on 05.21.2014
According to The Hollywood Reporter, Dr. Dre, Jimmy Iovine and others are being sued by former hedge-fund manager Steven Lamar for breach of contract over Beats Electronics, which is currently in the middle of negotiating a deal with Apple Computers.
Lamar wants four percent of royalties on headphone sales, among other demands. Lamar's cross-complaint happens in the middle of a legal battle that started in the Los Angeles Superior Court this past January after seven years of amicable relationships. Lamar claims he is the founder of Jibe Audio and Beats Headphones. He's been called the "father of Beats headphones" by others. In 2006, he was president of SLS International and gave his idea for headphones endorsed by a musician to Iovine, the the co-founder of Interscope Records.
The complaint reads: "Lamar's concept envisioned a partnership between technology that would provide a superior audio experience and an iconic product design and brand identity promoted by a well-known and respected music artist. Iovine proposed that Dre be the celebrity musical artist to endorse the headphones."
Lamar then worked with California-based firm Pentagram's Robert Brunner to design the headphones. He also worked with a Chinese manufacturing partner. In May 2006 he was introduced by Iovine to Jerry McDougal at Apple.
The complaint continues: "The proposal was to sell Beats Headphones in Apple stores,. McDougal was so interested in the Beats Headphones that he introduced Lamar to Don Inmon of Apple who was responsible for product placement in stores. Inmon worked with Lamar and others to ensure the packaging sized for Beats Headphones was compatible for Apple retail stores."
Beats ended up selecting Monster, LLC as a distribution partner. At the time, Iovine and Dre were set to get 20% while Lamar and Jibe got 5%, according to the complaint. In July 2006, Dre and Iovine filed a lawsuit against Pentagram, Lamar, Jibe and SLS over Beats, accusing them of not performing under a contract and trying to come out with their own "Beats" headphones without Dre's involvement. The lawsuit was settled and both Iovine and Dre agreed to pay 4% royalties on certain headphones, likely those designed by Pentagram or sold by Monster. Pentagram and Lamar were to split their royalty share. Lamar now claims that "Brunner surreptitiously negotiated a separate agreement with Iovine, Dre, and/or Beats Electronics" and "effectively cut Jibe and Lamar out of the royalty stream."
In the January lawsuit filed by Hinrichs & Associates (a tax and auditing firm assigned Pentagram's rights), it said Lamar also wanted royalties for "substantially similar" versions of the headphones. Lamar said that Pentagram and H&A have collected payments on one model while getting money from Beats for other "covered headphones."
He's suing for breaching the terms of the settlement and royalty agreement, as well as bad faith denial of contract. He's suing Brunner, Pentagram and H&A for breach of fiduciary duties and suing Brunner for tortious interference for allegedly inducing Iovine/Dre/Beats to back out of their deal made eight years ago.