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Monster Sues Beats Over Alleged Fraud

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Jan 7, 2015, 10:48 AM   by Eric M. Zeman   @phonescooper

Monster claims it was duped by Beats Electronics into giving away millions of dollars worth of intellectual property. Monster filed a lawsuit against Beats, its co-founders Jimmy Iovine and Dr. Dre, and HTC for conducting a sham transaction. Monster claims it created the Beats by Dr. Dre line of headphones and used Iovine and Dre only for promotional purposes. Iovine and Dre did not front any money in developing the headphones, which became very popular under the Beats brand after their 2008 debut. Monster's CEO personally helped design the headphones. Later, Beats forged a deal with HTC, which paid $300 million for a 51% stake in the company. This triggered a clause in the contract between Monster and Beats that forced Monster to hand over its intellectual property regarding the headphones. The financial relationship between HTC and Beats was eventually dissolved. Monster's CEO, who was promised there was no "liquidity event" in Beats' immediate future, sold off most of his shares of Beats. Several months later Beats turned around and sold itself to Apple for $3.2 billion. Monster's CEO alleges his shares would have netted him $100 million personally as part of the sale. The cost to Monster was much greater, though it didn't place a dollar value on its losses. None of the parties involved provided comment on the lawsuit.

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