Monster CEO Noel Lee files fraud lawsuit against Apple-owned Beats

The HTC deal was a “sham transaction” to “exclude Monster and Lee from future profits from the sale of the “Beats By Dr. Dre” product line and, ultimately, the sale of Beats as a company, to Apple,” the suit alleges.

Having severed ties with Monster and approving the acquisition by Apple, the Beats executives “made millions off the work of Lee and Monster,” the suit says. And since Beats “misappropriated the ‘Beats By Dr. Dre” technology and manufacturing and distribution channels, Monster and Lee lost millions of dollars,” the complaint says.

In the aftermath, “I came to realize that I think I’ve been duped,” Lee said during the interview here.

Apple declined to comment on the lawsuit and Beats has not responded to a request for comment.

Beyond the financial and intellectual property harms that Monster and Lee claim, they also say that Beats aims to “deceptively rewrite history” by erasing Monster’s participation in the rise of the premium headphone lineup.

Beats co-founder Iovine is described in the suit as “a respected but ruthless music mogul.” As for Dre, “other than his celebrity status as a rapper, Dre’s primary contribution was to bless Monster’s headphones when he exclaimed: ‘That’s the shit!’” the suit says.

That’s one of the reasons for filing the suit, Lee said. “To right the record.”

The U.S. headphone market amounted to about $2 billion in 2014, according to The NPD Group, with half made up by premium products such as Beats By Dr. Dre. Beats has about 60% of the premium market, compared with Monster’s single-digit percentage.

As the smaller company, Monster is trying to strike back at Beats, which is now attached to Apple, NPD analyst Ben Arnold said. The move could also be an effort to help Monster “gain market share,” he said.

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