Dr. Dre & Jimmy Iovine Ordered to Pay $25M Over Beats Headphone Royalties
A jury in Los Angeles on Wednesday ruled Steven Lamar was due royalties on all generations of the company's Studio headphone line.
A jury in Los Angeles Superior Court has handed down a $25 million verdict in favor of a former business partner of Beats co-founders Jimmy Iovine and Andre "Dr. Dre" Young. Steven Lamar filed his lawsuit in 2016, alleging breach of contract over lucrative royalties for the design for the original Beats headphones.
A jury on Wednesday decided that Lamar had fulfilled his contract and that the defendants should pay him royalties on the sales of three Beats headphone models, the Studio 2 Remastered, the Studio 2 Wireless and the Studio 3, to the tune of $25,247,350.
Iovine and Dre argued that Lamar was only entitled to royalties from the first headphone model -- the Beats Studio make -- leading to a controversy over whether a settlement the parties arrived at in 2007 amounted to a one-product deal or was inclusive of the celebrity-endorsed line of headphones that was later released.
In the 2016 lawsuit, which was filed by Lamar and Jibe Audio, Lamar contended that his contract referenced his rights to royalties on the headphones he helped propose with designs by Robert Brunner, a renowned industrial designer. He had been seeking over $100 million in royalties.
The 2007 deal Lamar signed with Iovine and Young specified only one headphone with a definition of the qualifying product, stating it "embodies the Headphone Design with minor cosmetic modifications." In his testimony last week, the plaintiff reviewed later Beats models' design and said the reoccuring smooth transition from the headband to the ear cup, symmetry of the ear cups and target location of the "b" logo were unique design characteristics of Beats headphones and those characteristics qualified as "minor cosmetic changes" that should be covered by the decade-old royalty agreement.
While Lamar's suit calculated the damage on all headphones, the jury verdict sided with him specifically on the Studio line of headphones and is how it reached the nearly $25 million decision. With the Studio 3 headphones currently on the market, the verdict means Lamar will continue to receive royalties on those sales. He is also entitled to his attorneys' fees and prejudgement interest under California law, bringing the total to over $40 million in Lamar's favor, according to his attorney Brian Melton of Susman Godfrey L.L.P., which took the case on a contingent fee.
"So while he didn't get exactly everything he asked from this jury on a headphone-by-headphone basis, we got 100 percent of what we asked for on the models that they did find," Melton tells Billboard.
"For anybody who has a great idea and brings it to a company and then doesn't get the recognition or credit that they're due ... what this jury verdict says is, if that happens to you and you're a little person, you can go into court and have a jury of American citizens determine whether you're right or wrong. And if you're right, you get the credit that you're owed," says Melton. "That's what I felt when I heard the jury verdict. It indicated four years of hard work in this case of standing side-by-side with Mr. Lamar, through the ups and downs, and going against one of the biggest companies in the world with some of the best lawyers in the world."
Melton says key to the case's success was he believes the jury understood that Lamar brought the idea of a celebrity-endorsed headphone line to Iovine and Dre. That is contrary to the popular narrative Iovine and Dre have pushed in press and their HBO documentary series The Defiant Ones. "They tried to paint him as some guy who was just there at the right time and the right place, and they already had the idea," says Melton. "I don't think that was it at all and I think we proved just the opposite: That before they met Lamar, they hadn't thought about this and he gave it to them on a silver platter."
In this regard, Melton says his client was able to provide proof to support his claims, whereas Iovine and Dre "had no documents, no emails, no texts -- there was nothing to prove it."
Melton also thinks Lamar proved to be a more credible witness than Iovine, who claimed during his testimony he had only "wanted a one-product deal," while the jury found that was not what the contract stipulated. As well, he pointed out Iovine's claims were undermined by Beats' failure to pay Lamar the full amount owed for the first generation of Studio headphones -- a matter that was settled previously but still came up in this trial.
Here and throughout the case, Melton says Iovine and Dre "played the celebrity card hoping it would get them out of jail free, and it did not." He continued, "I think whether you're an individual who has a great idea featuring a major celebrity or you're just any kind of person, the jury's looking for credibility on the stand. And they got to see Mr. Lamar, they got to see Jimmy Iovine, they got to see Andre Young, Dr. Dre, and they made their decision based on witnesses on the stand. I don't believe jurors really take into account the celebrity necessarily in these instances. The other side played it up, I think they thought playing music throughout the trial, hyping up this celebrity stuff was going to get them out of jail for free. And it didn't work out that way."
Additional reporting by Heran Mamo.