Monster can't make Apple-certified audio and video cables anymore now that the Mac and iPhone maker has pulled the company's MFI certification status. The decision, according to Monster's legal team, was in response to a lawsuit it filed against Beats Electronics—a company Apple now owns.
Apple kills Monster's MFI certification over Beats lawsuit
The lawsuit claims Beats Electronics conspired with HTC to trick Monster and push the company out of a deal with Beats ahead of its sale to Apple. Monster's lawsuit says Beats "fraudulently acquired" the Beats by Dr. Dre headphones product line through a "sham transaction" with HTC.
HTC purchased a 51 percent stake in Beats in 2011, and then Beats bought back 25.5 percent of its shares from HTC a month after the deal closed. That invoked a change of ownership clause that let Beats end its dealings with Monster.
The HTC transaction started in 2011, and Apple agreed to buy Beats in early 2014. Sources claim Apple had been working on the deal for years, implying Beats orchestrated the HTC transaction to get Monster out of the picture.
Monster helped develop and manufacture the headphones in exchange for licensing rights to the Beats brand. Apple's plans to buy Beats for its streaming music service and headphones would've run up against a brick wall had Monster still been in the mix, so the lawsuit claims Beats concocted a plan to push the company out ahead of the deal.
Monster claimed that the clause forced it to give all related intelectual property to Beats, costing it millions of dollars in lost revenue, according to the Wall Street Journal. Adding insult to injury, Monster CEO Noel Lee sold his shares in the company only eight months before Apple's deal was announced because a Beats board member assured him any potential "liquidity event" was a year or two out.
Apple's legal team told Monster its MFI license was being terminated as of May 5 because the relationship between the two companies was no longer "mutually beneficial," and that the lawsuit would ruin the working relationship they had. Monster, however, saw the move as little more than retribution.
"It shows a side of Apple that consumers don't see very often," said Monster general counsel David Tognotti. "Apple can be a bully."
Monster makes about 900 products as a part of Apple's MFI program, but now has to change packaging and implement redesigns to avoid licensing issues.