A California appeals court has overturned the original ruling.
Dr. Dre and Jimmy Iovine could be set to return to court and potentially go to trial in a royalties dispute over Beats headphones.
Former hedge fund manager Steven Lamar first filed a case against the Beats co-founders two years ago, but his claims were rejected by a judge in the Los Angeles superior court in June 2015. However, according to the Hollywood Reporter, on Monday (September 19) a California appeals court overturned the original ruling, stating that the royalty agreement made between Lamar and Beats is “ambiguous” enough that it should go before a jury.
Lamar had come on board with the company around the time it was founded in 2006. He says that Dre and Iovine did not want to invest their own money in the project to bring high-end headphones to consumers. Lamar claims to have done work identifying a manufacturer as well as trying to source investors.
In 2006 he was then sued by Dr. Dre and his co-founder Jimmy Iovine for failure to meet contractual agreements and intending to launch his own Beats range without Dr. Dre involved. Iovine and Dr. Dre agreed to pay a 4% royalty, but Lamar is now claiming that he is owed royalties for all future sales of headphones derived from the original version, rather than simply the 4% he gets on past models.
Dr. Dre and Iovine’s argument is that the royalty agreement was for a single product only and didn’t cover future designs. Lamar presented evidence that other models had been discussed, pointing out that the 2006 suit against him discussed a “line of headphones”.
“Based on the extrinsic evidence presented and the language of the contract, we find that it is equally, if not more, plausible that the parties contemplated the interpretation for which Lamar advocates,” California appeals court judge Roger Boren said in his ruling.
“There is no language in the contract limiting the agreement to a single model or product. Instead, the focus of the agreement is on the patented design on which the parties collaborated. Lamar has presented evidence that other headphone models, such as the Solo, were protected by the same patent granted on the headphones design illustrated in Schedule I of the Royalty Agreement. He has also presented evidence that the parties, including Brunner, contemplated that a wireless model based on the headphones design would be covered by the Royalty Agreement. Thus, the agreement is certainly reasonably susceptible to an interpretation that it covers more than just the original, Studio, headphone model.”