Dr. Dre Goes to Trial in $100 Million Beats Headphone Royalties Case

A trial is now underway in Los Angeles Superior Court that explores the beginning of high-end Beats headphones and the dealmaking that allegedly left entrepreneur Steven Lamar out of more than $100 million in royalties.

Lamar is suing Andre “Dr. Dre” Young, Jimmy Iovine, and Beats Electronics. Lamar alleges being the one back in 2006 to propose to Dre and Iovine a line of celebrity-endorsed headphones based on a design by Robert Brunner, a renowned industrial designer.

But the parties had a falling out in the early years, and Dre and Iovine sued Lamar for breaching contract. This prior lawsuit then led to a settlement where Lamar relinquished rights in exchange for a four percent royalty on every headphone sold by Monster and its affiliates. After the settlement, Beats released new headphone models and began paying a two percent royalty to Brunner until sometime in 2014 when Beats bought out Brunner’s interest. Dre and Iovine would later sell Beats to Apple for $3 billion.

The big question in the case is whether Lamar is due royalties for the later derivative versions of Beats headphones or whether the defendants fulfilled its obligations by merely paying him for the first headphone model.

The trial judge initially rejected Lamar’s claims, but in Sept. 2016, a California appeals court revived the lawsuit by finding that the royalty agreement was “ambiguous” enough that a jury must consider the factual conflict about the interpretation of the contract. And so the parties are now at trial presenting evidence about whether the royalty agreement was meant to be a one-product deal or more. Dre and Iovine say that when the deal was made, nobody knew that Beats would be such a success where there would be follow-up versions, but Lamar points to a PowerPoint presentation from the early days where he contemplated different models and the parties’ future collaboration on a “line of headphones.” Source: HR