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Monster Sues Beats Over Takeover Dispute

Monster, the original partner in the Beats by Dre headphone brand, are currently pursuing legal action against Beats Electronics and HTC, claiming that behind the scenes stock trading and other grey area financial dealings forced them out of the company prior to the sale of Beats to Apple.

The accusations in the lawsuit, which can be read at the source below, speak of ‘betrayal and misrepresentation’ being used to ‘defraud’ Monster of the profits from the Apple deal.

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Monster’s alleged ‘forcing out’ prior to the $3 billion purchase of Beats by Apple meant that Monster themselves did not come into any profit or see any revenue from the takeover. The company claims that this was an intentional move by the defendants to deny them the profits from the Beats range, which Monster are adamant they were hugely instrumental in promoting and manufacturing.

Indeed, back in 2008 when the immensely popular Beats range was launched, Monster had a very big hand in the launching and promotion of the brand, to say the very least.

Dr. Dre has been named in the documented lawsuit at the link below.

The financial maneuvering in question concerns the purchase of a 50.1% share in Beats back in 2011 by HTC. According to the records, following the sale, Monster bought back 25.5% of those shares back from HTC, then proceeded to re-acquire the remaining shares in 2013.

This enabled Beats themselves to claim a change of ownership of the intellectual property behind their products, allowing them to claim ownership of said property from Monster. Of course this meant that, following the selling and buying of shares, Monster were left high and dry after the deal with Apple commenced, even though they claimed to be instrumental in the creation and development of Beats.

Additionally, Monster CEO Noel Lee claims he was convinced to sell of shares which would have been worth $100 million following the Apple deal, after he was told that there was no acquisition of Beats planned in the near future – no “liquidity event” was planned.

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All in all it’s a tricky one, as the change of ownership clause which was used to push Monster into handing over ownership of Beats intellectual property is fair and legal, even though it may have been misused in order to deny Monster their share of the Apple deal.

If anything, it’s a harsh reminder that contractual obligations can, and will, be abused by eagle-eyed readers of the fine print, especially when money is on the table. Whether the law will find in favor of Beats or Monster is currently up in the air, but it’s more than likely as no laws have been broken the case may be thrown out.

Via: Techspot

Source: Legal Document @ CPM Legal