Dr. Dre and Jimmy Iovine Testify in Court for $100 Million Beats Headphone Royalties Case

2012-25 REP DEALS Dr. Dre Jimmy Iovine H

When Beats Electronics purchased MOG, the high-end headphone and sound system maker founded by rap mogul Dr. Dre (at left) and Interscope-Geffen-A&M chairman Jimmy Iovine (right) got one step closer to creating an end-to-end music experience.

A year after revealing their life stories in the HBO documentary The Defiant Ones, Andre "Dr. Dre" Young and Jimmy Iovine gave an encore performance in court this week as they testified in a case brought against them by a former business partner. Steven Lamar is suing the two and Beats Electronics for leaving him out of more than $100 million in royalties for the headphone design.

The lawsuit, which was originally filed by Lamar and Jibe Audio in September 2016, alleges a breach of contract in the general settlement agreement between Lamar and the Beats founders. According to Lamar, the contract references his rights to royalties on the headphones he helped propose with designs by Robert Brunner, a renowned industrial designer. The Beats parties argue that Lamar is only allotted royalties from the first headphone model — the Beats Studio make — leading to a controversy over whether their settlement stated a one-product deal or is inclusive of the iconic celebrity-endorsed line of headphones that was later released. 

Despite Apple’s $3 billion acquisition of Beats in 2014, Iovine and Young gave their testimonies in front of a jury this week, summarizing their musical expertise, their company’s foundation and the headphones' emblematic, trademarked legacy. The two Beats moguls wore crisp black suits to court Tuesday and Wednesday, with one Dr. Dre devotee notably ushering himself into the courtroom both days and declaring the lawsuit against the Grammy-winning producer and recording artist “unjust.”

Iovine gave his testimony first, delving into his musical background from early influences such as The Beatles and The Rolling Stones garnering his initial interest to taking paid and unpaid gigs at recording studios until he was asked to come into work on Easter in 1973 to fill in for John Lennon’s assistant engineer, who had quit. From there, his career began to take off. “My whole life is about finding people who change culture,” Iovine said in front of the jury. 

Iovine met Dr. Dre when the producer and recording artist was trying to release his debut solo album, The Chronic, after he was without a record deal. While Dr. Dre’s “untamed bass” concerned Iovine, he said the genesis of peer music-sharing website Napster years later perturbed him more. “We are screwed, we are toast,” said Iovine, recalling his sentiments at the time.

The Interscope Records founder began meeting with technology companies to figure out digital distribution deals and, after meeting with late Apple CEO and co-founder Steve Jobs in 2003, Iovine helped get licenses from other labels to sell music online through iTunes. The Interscope-Apple relationship led to a conversation between Iovine and Jobs about making headphones, a conversation that was later adopted by Dr. Dre.

“Let’s get the sound of iTunes right,” Dr. Dre told his future business partner at the time. His background as record producer and recording artist validated a dissatisfaction that the earbuds packaged with his children's iPods ruined the sound quality of his own music. Dr. Dre took the stand to relate his personal history — from building his own sound system with two turntables as a teenager to meeting Ice Cube and forming the hip-hop group N.W.A — while the jury was treated to 15-second snippets of 2pac’s “California Love” and Dr. Dre's own “Still D.R.E.” tracks to show off his production résumé. “For me, engineering is so important,” Dr. Dre said in front of the jury. “What I put on through music cannot go through these earbuds,” he said. 

Iovine convinced Dr. Dre to make speakers with him. “We can fix your earbud problem.” Dr. Dre’s response produced the name of the line of headphones they would eventually make: “Man, I make beats. I want to make something called Beats. Beats by Dre.”

Dr. Dre said he was only interested in doing a one-product deal for the Studio headphones. And although he testified he did contribute some creative input to the subsequent Solo design, he said it was Brunner — at the time an employee of Pentagram, the world’s largest independent design consultancy — who presented Beats logos and designs to him and Iovine at Interscope Records in February 2006 when the company was founded. “I can’t say that Mr. Lamar was at the meeting,” Dr. Dre said. He also denied that Lamar gave a presentation in April 2006 called “Creation of a New Audio Experience.”

When Iovine was interrogated about the different designs of the Beat headphones presented to him, he said, “I am not a designer. They all come from the same company.” He paid Brunner to do the designs for the Solo headphone in a separate contract that mentioned royalties and royalty caps. “I did not know Mr. Lamar was getting the royalties,” he said.

In July 2006, Dr. Dre’s lawyers filed a suit against Jibe Audio, Pentagram and Lamar which accused them of failing to meet contractual agreements, according to a report by The Guardian. In April 2007, Iovine and Dr. Dre signed a settlement and mutual release agreement that agreed to pay a royalty on the basis of "4 percent base price of every headphone." The contract only specified one headphone with a definition of the qualifying product, stating it "embodies the Headphone Design with minor cosmetic modifications."

Lamar later took the stand to dispute his rights to those remaining royalties of which he was left out and and had discharged in the general settlement agreement. "I’m waiving my claims to the intellectual property," he said. Pentagram’s portion in the agreement had specified the firm was not waiving their rights to royalties, the legal language reading "except for the payment obligation set forth in the Royalty Agreement." The same language was not applied to Lamar, Jibe and SLS in the contract.

“Pentagram is supposed to pay me through the royalty agreement,” Lamar said. “What this language is trying to cover is us releasing our intellectual property.”

In a cross examination, Lamar was presented four sets of graphics, each showing the drawing from the royalty agreement, a photo of a different Beats model and a design graphic not included in the royalty agreement. He identified that in each set of pictures presented to him, the graphic not included in the agreement resembled the picture of the headphone next to it, meaning the drawing in the royalty agreement could not be paralleled to the later Beats models for which Lamar alleges he is still owed royalties. 

Lamar confirmed he waived “all of my ownership and rights and intellectual property” to Iovine and Dr. Dre. When shown physical examples of later Beats models compared to two drawings from the royalty agreement, he said the 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 that are shared by every make. He argued those characteristics qualified as “minor cosmetic changes” covered by the royalty agreement.

This story first appeared on Billboard.com