Beats Electronics Hit With More Legal Actions Likely Complicating Apple M&A Talks

Beats Electronics faces more fallout from its complicated history. Not only are they dealing with a $20 million lawsuit from David Hyman, the founder of MOG which Beats acquired, but now they're facing an additional claim related to an ongoing dispute about the early development of Beats headphones. That's at least three lawsuits currently in progress against Beats Electronics. Could this be delaying the negotiation process regarding a possible acquisition by Apple?

David Hyman Sues Beats

Earlier this month David Hyman, the CEO of MOG which was acquired by Beats Electronics as part of the development of Beats Music, sued Beats for what he claims was an unfair firing designed to keep him from receiving millions in incentives.

While that's ongoing so is a dispute that dates back to 2006 and initial designs for what would become Beats' headphones.

Early Suits Involving Pentagram/H&A and Steve Lamar

Jibe Audio founder Steve Lamar and Pentagram proposed designs for Beats in 2006 but were then sued by Beats for "failing to perform under the contract and intending to come out with their own 'Beats' headphones without Dre's involvement."

Counterclaims were filed and in 2007 they worked out a deal:

"According to a copy of the agreement that has just surfaced, Iovine and Dre agreed to pay Pentagram a 4 percent royalty on the sale of any headphones using the design feature developed by the company. In turn, Pentagram agreed to turn over half of those payments to Lamar and his companies."

"Eventually, Pentagram's rights to receive about $16 for a pair of $400 'Beats' headphones was assigned to Hinrichs & Associates (H&A), a tax and auditing firm."

Pentagram/H&A Sues Beats

In January of 2014 H&A opened things back up with a claim that later headphones created by Beats should also be included in the agreement. This suit is ongoing.

Steve Lamar Sues Beats and Everybody Else

Now Steve Lamar is getting back in the mix with his own lawsuit filed last Friday that states that H&A/Pentagram have been collecting money all along for additional headphones for which Lamar was not compensated.:

"So now the self-professed founder of Beats is suing Iovine, Dre, Beats, Pentagram and H&A for breaching the terms of the settlement agreement and royalty agreement. He's suing the same parties for bad faith denial of contract; suing Brunner, Pentagram and H&A for breach of fiduciary duties; and suing Brunner for tortious interference for allegedly inducing Iovine/Dre/Beats to renege on their contractual obligations made eight years ago."

Could this be a reason for the delay in negotiations between Beats and Apple?

Stay tuned for more!

More:

• Beats Hit By $20 Million Lawsuit From MOG Founder David Hyman
• Apple In Talks To Buy Beats Electronics, $3.2 Billion Said To Be Mostly For Headphone Business
• Attack Marketing: Monster Disses Beats By Dr. Dre As Swizz Beatz Joins Board

Hypebot Senior Contributor Clyde Smith (@fluxresearch) posts music crowdfunding news @CrowdfundingM. To suggest topics about music tech, DIY music biz or music marketing for Hypebot, contact: clyde(at)fluxresearch(dot)com.

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