In case you’re wondering, Beats Electronics is trying to collect $71 million in unpaid royalties from the audio-video cable maker Monster. After auditors calculated the exchange rates, Beats believes they are owed a cool $95 million.
Beats filed a breach of contract with the Los Angeles County Superior Court on Sept. 15, 2017. But history shows this has been going for nearly eight years.
Allow me to break it down
Beats and Monster became business buddies in August 2009. The two had an ironclad distribution agreement where Beats tapped Monster to make and market Beats by Dr. Dre headphones.
By 2011, Beats decided to end its partnership with Monster and then jumped into the sack with the smartphone manufacturer HTC.
In 2012, Beats signed several distribution and royalty agreements after the licensing deal ended with Monster. Although the Monster licensing deal was a one and done, Beats allowed Monster to sell some products in selected retail stores.
Then on a beautiful money-making day in August 2014, Apple Inc. opened up its chest full of cash and sealed the deal to buy Beats for $3.2 billion.
And no, Beats didn’t share any of the proceeds from the deal with Monster.
A year after the deal Monster and its founder Noel Lee sued Beats, Dr. Dre, Jimmy Iovine and HTC, claiming they were cheated out of their stake in the headphone company in the Apple deal. A Los Angeles state court judge threw out the lawsuit in August 2016.
Are you still following? Great. Allow me to continue.
Let’s go back to June 2015 when Law360.com reported that Beats was fighting another royalty lawsuit. This time it was for royalties for the first and second set of fancy headphones. Or was it the third set of designer headphones? It doesn’t even matter. The judge ended up agreeing with Beats.
But then there was an appeal!
The court of appeal found the agreement’s language problematic. “There is no language in the contract limiting the agreement to a single product or model,” wrote Presiding Judge Roger Boren. “Thus, the agreement is certainly reasonably susceptible to an interpretation that it covers more than just the original, Studio, headphone model.”
If you’re in the mood to dive deeper, you can get the full breakdown at LawJournalNewsletters.com.
Dear Beats Electronics vs. Monster,
I thoroughly looked into this case and it totally reeks of confusion. I can’t even try to figure this out…but I will say this:
Beats – you should have known things were going to get messy after Apple gave you $3 billion for your headphones.
Monster – let this be a lesson to you. Structure better deals.
Sincerely,
