Apple's lawyers defend Beats against claims it cut out old partner from $3.2 billion sale: 'Regret is insufficient'

In a new profile by Bloomberg, Monster CEO Noel Lee tells the tale of how he was allegedly betrayed by Dr. Dre and Jimmy Iovine and cut out of Beats’ $US3.2 billion sale to Apple.

In the early days of Beats, Monster was the manufacturing partner who manufactured, marketed, and distributed Beats headphones, paying Dre and Iovine a 19% fee for using both the Beats name and their celebrity cache. But Lee says that wasn’t all Monster brought to the table.

Lee claims he came up with the whole idea. “[Dre and Iovine] were talking about building a better speaker, and I said, ‘Headphones are the new speakers. Let’s make headphones together.’ And that’s where Beats came from,” Lee told Bloomberg.

Dre and Iovine, of course, dispute this. According to Iovine, he and Dr. Dre came up with the idea for Beats when they bumped into each other on the beach, and while it sounds like the idea did evolve from sneakers to speakers to speakers and headphones, Iovine says that all happened on the beach.

I was walking down the beach one day and I ran into Andre Young, Dr. Dre.

I was exercising, and I said, ‘How’re you doing?’ And Dre is very soft-spoken, doesn’t talk much, he just said to me, ‘Yo, my lawyer, he wants me to sell sneakers — what do you think?’

I said, ‘Dre, nobody in the world cares about how you dress or will care about your sneakers. What you should sell is speakers.’ At that moment, he said to me, ‘We can do that?’ And I said, ‘F— yeah.’

He said, ‘You know I use this word ‘beats, you know, I make beats, right, so ‘Beats by Dr. Dre.’

I said, ‘OK, headphones … beats … by Dr. Dre — headphones and speakers.’ He said, ‘I’m in,’ and that was the beginning of the company, and that’s exactly how it happened.

Lee is currently suing Dre, Iovine, and the phone company HTC, accusing them of masterminding a sham acquisition of Beats by HTC to trigger a specific clause in Monster’s contract. That clause allowed Beats to end its manufacturing agreement with Monster if there was a change in ownership of the company.

“We didn’t think that much about it,” Lee said to Bloomberg. “We saw ourselves as in business with Dre and Jimmy for the long term.” What he didn’t count on was Dre and Iovine selling the company to HTC and then buying it back. And Lee claims it was all to lay groundwork for the Apple acquisition.

Monster Noel Lee Kevin Lee Getty / Tim WhitbyMonster’s Noel and Kevin Lee

If Apple believes there is any kernel of truth to Lee’s version of the history of Beats, it’s doing a good job hiding it. Though Apple is not named as a defendant in the lawsuit, its lawyers are defending Dre and Iovine. And they are coming out swinging.

“Lee apparently regrets his business decisions and now asks that he and Monster be excused from as many of their contractual obligations as possible, but regret is insufficient,” Apple’s lawyers assert, according to Bloomberg.

It’s not hard to see that Apple clearly believes it owes Noel Lee nothing.

You can read the whole profile over at Bloomberg.

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