SAN FRANCISCO-#3458054-v15-Beats Central District False ... · BEATS ELECTRONICS, LLC, Plaintiff,...
Transcript of SAN FRANCISCO-#3458054-v15-Beats Central District False ... · BEATS ELECTRONICS, LLC, Plaintiff,...
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MEMORANDUM OF POINTS & AUTHORITIES IN SUPPORT OF MOTION TO DISMISS COMPLAINT
STEPHEN E. MORRISSEY(187865)
SUSMAN GODFREY L.L.P.
1201 Third Avenue, Suite 3800
Seattle, Washington 98101
Telephone: (206) 373-7380
Facsimile: (206) 516-3883
BRIAN MELTON (Pro Hac Vice Application Pending)
SUSMAN GODFREY L.L.P.
1000 Louisiana St., Suite 5100
Houston, Texas 77002
Telephone: (713) 651-9366
Facsimile: (713) 654-6666
Attorneys for Defendants Steven Lamar and ROAM, Inc. (Additional Counsel for Defendants Listed on Signature Page)
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
BEATS ELECTRONICS, LLC, Plaintiff, v. STEVEN LAMAR; ROAM, LLC; ROAM, INC; and DOES 1-10, inclusive,
Defendants.
Case No. 2:14-cv-07537-FMO(MRWx)
Hon. Fernando M. Olguin
MEMORANDUM OF POINTS & AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS PLAINTIFF’S COMPLAINT PURSUANT TO RULE 12(B)(6) Date: January 29, 2015 Time: 10:00 a.m. Place: Courtroom 22
Case 2:14-cv-07537-FMO-MRW Document 11-1 Filed 11/21/14 Page 1 of 15 Page ID #:141
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MEMORANDUM OF POINTS & AUTHORITIES IN SUPPORT OF MOTION TO DISMISS COMPLAINT
TABLE OF CONTENTS
I. INTRODUCTION ............................................................................................ 3
II. BACKGROUND .............................................................................................. 3
III. LEGAL STANDARD ...................................................................................... 5
IV. ARGUMENT ................................................................................................... 6
A. Beats’ Complaint Fails to State a Claim for Relief That Is
Plausible on Its Face Because It Is Neither False Nor Misleading
for Mr. Lamar to be Described as a “Co-Founder of Beats by Dr.
Dre” ........................................................................................................ 6
B. Beats’ Complaint Should be Dismissed Because It Should Have
Been Filed as a Compulsory Cross-Claim to Mr. Lamar’s State
Court Action ........................................................................................... 9
1. Beats’ federal claims are logically related to Mr. Lamar’s state
court claims ................................................................................ 10
2. Beats’ federal claims arose before service of its answer in the
state court action ........................................................................ 13
V. CONCLUSION .............................................................................................. 13
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MEMORANDUM OF POINTS & AUTHORITIES IN SUPPORT OF MOTION TO DISMISS COMPLAINT
TABLE OF AUTHORITIES
CASES
Albright v. Gates, 362 F.2d 928 (9th Cir. 1966) ............................................................................ 13
Align Tech., Inc. v. Bao Tran, 179 Cal. App. 4th 949 (2009) ............................................................... 10, 11, 13
Ashcroft v. Iqbal, 556 U.S. 662 (2009) ........................................................................................... 5
Cheiker v. Prudential Ins. Co., 820 F.2d 334 (9th Cir. 1987) .............................................................................. 9
Currie Med. Specialties, Inc. v. Bowen, 136 Cal. App. 3d 774 (1982) ...................................................................... 10, 11
Dawson v. Mahoney, 451 F.3d 550 (9th Cir. 2006) .............................................................................. 4
In re Crown Vantage, Inc., 421 F.3d 963 (9th Cir. 2005) .............................................................................. 9
Jackson v. Carey, 353 F.3d 750 (9th Cir. 2003) .............................................................................. 6
Lee v. City of Los Angeles, 250 F.3d 668 ....................................................................................................... 4
Pareto v. F.D.I.C., 139 F.3d 696 (9th Cir. 1998) .............................................................................. 6
Pochiro v. Prudential Ins. Co. of America, 827 F.2d 1246 (9th Cir. 1986) ...................................................................... 9, 11
Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997) ............................................................ 7, 12
Sprewell v. Golden State Warriors, 266 F.3d 979 (9th Cir. 2001) .......................................................................... 6, 7
United Artists Corp. v. Masterpiece, Prods., 221 F.2d 213 (2d Cir. 1955) ................................................................. 10
STATUTES
15 U.S.C. § 1125(a) ................................................................................................. 5
Cal. Bus. & Prof. Code § 17200 .............................................................................. 5
Cal. Bus. & Prof. Code § 17500 .............................................................................. 5
Cal. Civ. Proc. Code § 426.10 ............................................................................... 10
Cal. Civ. Proc. Code § 426.30 ......................................................................... 10, 13
RULES
Fed. R. Civ. P. 12(b)(6) ....................................................................................... 3, 5
Fed. R. Civ. P. 13(a) .............................................................................................. 10
Fed. R. Evid. 201 ................................................................................................. 4, 8
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Defendants Steven Lamar and ROAM, Inc. respectfully submit the following
memorandum of points and authorities in support of his motion to dismiss Plaintiff
Beats Electronics, LLC’s Complaint pursuant to Rule 12(b)(6) of the Federal Rules
of Civil Procedure.
I. INTRODUCTION
In May 2014, Defendant Steven Lamar filed suit against Plaintiff Beats
Electronics, LLC (“Beats”) in Los Angeles County Superior Court alleging that,
among other things, Beats had breached Mr. Lamar’s contractual right to receive
royalty payments for his role in developing the iconic “Beats by Dr. Dre”
headphones. Four months later, Beats filed the present suit against Mr. Lamar,
alleging that he is engaged in false advertising and unfair competition by referring
to himself as a “co-Founder of Beats by Dr. Dre.” Beats’ Complaint should be
dismissed for two alternative reasons. First, Beats’ claims are contradicted by
undisputed facts regarding the parties’ collaboration in developing the “Beats by
Dr. Dre” brand, and its Complaint therefore fails to state a claim upon which relief
can be granted. Second, to prove their respective claims before the state court and
this Court, the parties will rely on much of the same evidence, many of the same
witnesses, and present many of the same facts. Their cases are inextricably
intertwined and therefore should proceed in one court, the state court, which
assumed jurisdiction over the matter months before this Court, and which can—and
indeed must—hear Beats’ claims as compulsory cross-claims to those brought by
Mr. Lamar. Under either theory, this Court should dismiss Beats’ Complaint with
prejudice.
II. BACKGROUND
In early 2006, Steven Lamar, James “Jimmy” Iovine, and Andre Young p/k/a
“Dr. Dre” agreed to collaborate on the design, production, and sale of a new
headphone product line to be marketed and sold as “Beats by Dr. Dre.” (Dkt. No. 1
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[“Compl.”] ¶¶ 16–17; RJN Exh. A [“Cross-Compl.”] ¶¶ 13–15.)1 As part of that
collaboration, Mr. Lamar engaged a design firm to assist in developing the design
and corporate identity of the new line of headphones. (Cross-Compl. ¶ 15.) He
additionally found a manufacturing partner to engineer and manufacture prototypes
of the Beats headphones. (Id. ¶ 17.) By May 2006, the project was developing
such that Mr. Iovine began introducing Mr. Lamar to potential distribution partners,
including Apple, Inc. and Monster Cable Products, LLC, to secure their partnership
in selling Beats branded headphones to the general public. (Id. ¶¶ 20–22.)
Unfortunately, by July 2006, the partnership between Messrs. Lamar, Iovine,
and Young had deteriorated to the point where Messrs. Iovine and Young sued Mr.
Lamar, among others, for allegedly breaching their oral agreement concerning the
manufacture, marketing, and distribution of Beats branded headphones. (Compl. ¶¶
18; Cross-Compl. ¶ 23.) The parties settled the dispute out-of-court the next year.
(Compl. ¶ 18; Cross-Compl. ¶ 24.) As a result of the settlement, Mr. Lamar and the
other defendants in the case agreed to relinquish their rights, title, and interest in the
headphone design and the trademark “Beats by Dr. Dre.” (Compl. ¶ 18.) In return,
the parties executed royalty agreements whereby Mr. Lamar and the other
defendants would receive a royalty on all “Covered Headphones” subject to
specified limitations identified in the agreements. (Cross-Compl. ¶¶ 29–30.)
When the Beats Studio headphones—the first Beats branded headphones to
be released—were released in 2008, Mr. Lamar began receiving royalty payments
under the settlement and royalty agreements. However, when subsequent iterations
1 Pursuant to Federal Rule of Evidence 201, a court may take judicial notice of
“matters of public record” without converting a 12(b)(6) motion to dismiss into a motion for summary judgment. See Lee v. City of Los Angeles, 250 F.3d 668, 688–89 (9th Cir. 2001) (citing Fed. R. Evid. 201). The cross-complaint filed by Mr. Lamar in Los Angeles County Superior Court is a matter of public record, and may be judicially noticed by this Court. See Dawson v. Mahoney, 451 F.3d 550, 551 n.1 (9th Cir. 2006) (citing Fed. R. Evid. 201(b), (c)) (taking judicial notice of a state court’s orders and proceedings). The state court pleading is cited here to provide necessary factual context to the nature of the claims raised here by Beats.
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of the headphones were released, Mr. Lamar did not receive royalty payments on
them. (Cross-Compl. ¶ 33.) The royalty payments stopped altogether by the end of
2013. (Cross-Compl. ¶ 37.) As a result, in January 2014, Mr. Lamar made a
demand for payment of his owed royalties under the agreement, and ultimately, was
forced to file a cross-complaint against Messrs. Iovine, Young, and Beats, among
others, to protect his rights.2 In his state court claim, Mr. Lamar alleges, in part,
that these actions constituted a breach of the settlement and royalty agreements by
Messrs. Iovine and Young, and by Beats, which is believed to have succeeded-in-
interest to some or all of Messrs. Iovine and Young’s rights and obligations under
the contracts. (Cross-Compl. ¶ 44–50.)
Six months after Mr. Lamar filed his cross-complaint in state court, Beats
filed the present action. Beats alleges that in advertising his new headphones
venture, Mr. Lamar violated the Lanham Act, 15 U.S.C. § 1125(a), California’s
False Advertising Law, Cal. Bus. & Prof. Code § 17500et seq., and California’s
Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200, et seq., by describing
himself as a “co-Founder of Beats by Dre” on his new venture’s web site. (Compl.
¶¶ 23.) Meanwhile, the claims in the state court, related to the royalties owed to
Mr. Lamar for his role in creating the “Beats by Dr. Dre” brand of headphones,
remains pending.
III. LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(6) requires that a plaintiff’s complaint
must be dismissed when the allegations contained within it fail to state a claim upon
which relief can be granted. In order to survive a 12(b)(6) motion to dismiss, a
complaint must state a claim for relief that is plausible on its face. Ashcroft v.
2 Mr. Lamar’s claims were filed as cross-claims because after he made the demand
for payment of his owed royalties, Hinrichs & Associates and Pentagram Design, Inc., the entities from whom he was to directly receive royalty payments under the royalty agreement, filed a declaratory judgment action in state court to determine its obligations.
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Iqbal, 556 U.S. 662 (2009). In evaluating whether that standard has been met, the
court must accept as true all material allegations of the complaint, as well as all
reasonable inferences to be drawn therefrom. See Pareto v. F.D.I.C., 139 F.3d 696,
699 (9th Cir. 1998). It should additionally construe the complaint in the light most
favorable to the nonmoving party. See Sprewell v. Golden State Warriors, 266 F.3d
979, 988 (9th Cir. 2001). However, the court need not accept as true allegations
that contradict matters that are properly subject to judicial notice. See id. (citing
Mullis v. United States Bankr. Court, 828 F.2d 1385, 1388 (9th Cir. 1987)).
Moreover, the court is not required to accept as true allegations that are merely
conclusory, unwarranted deductions of fact, or unreasonable inferences. See id.
(citing Clegg v. Cult Awareness Network, 18 F.3d 752, 754–55 (9th Cir.1994)).
Where the plausibility standard cannot be met and the court is satisfied that the
deficiencies within the complaint cannot be cured by amendment, dismissal with
prejudice is appropriate. See Jackson v. Carey, 353 F.3d 750, 758 (9th Cir. 2003).
IV. ARGUMENT
A. Beats’ Complaint Fails to State a Claim for Relief That Is
Plausible on Its Face Because It Is Neither False Nor
Misleading for Mr. Lamar to be Described as a “Co-
Founder of Beats by Dr. Dre”
Each of the four causes of action pleaded by Beats is predicated on the
alleged falsity or misleading nature of Mr. Lamar’s description as a “co-Founder of
Beats by Dre.” (See, e.g., Compl. ¶¶ 40, 50, 57, 64.) Because such allegations are
contradicted by Beats’ own pleadings, in this Court and before the state court, they
need not be accepted as true, and should not serve as a proper factual basis for
Beats to assert a claim against Mr. Lamar or ROAM.
Beats’ false advertising claim under the Lanham Act is illustrative of this
fatal deficiency of its Complaint. In order to state a claim for false advertising
under the Lanham Act, 15 U.S.C. § 1125(a), a plaintiff must plead: (1) defendant
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made a false statement of fact in an advertisement; (2) the statement actually
deceived or has the tendency to deceive a substantial segment of its audience; (3)
the deception is material, in that it is likely to influence the purchasing decision; (4)
the defendant caused its false statement to enter interstate commerce; and (5) the
plaintiff has been or is likely to be injured as a result of the false statement, either
by direct diversion of sales from itself to defendant or by a lessening of the
goodwill associated with its products. See Southland Sod Farms v. Stover Seed
Co., 108 F.3d 1134, 1139 (9th Cir. 1997). Beats’ Complaint fails to state a claim
because its allegation that Mr. Lamar’s description of himself as a “co-Founder of
Beats by Dre” is false or misleading is belied by Beats’ own description of Mr.
Lamar’s role in developing the headphone brand. See Sprewell v. Golden State
Warriors, 266 F.3d 979, 988 (9th Cir. 2001)Error! Bookmark not defined.
(noting that on a motion to dismiss, a court is not required to accept as true
allegations that contradict matters that are properly subject to judicial notice, nor
allegations that are merely conclusory, unwarranted deductions of fact, or
unreasonable inferences).
It cannot reasonably be disputed that Mr. Lamar played an early role in
founding the Beats brand. Beats’ false advertising and unfair competition claims
originate from a 2006 business relationship between Messrs. Iovine, Young, and
Lamar. (See Compl. ¶¶ 17–18.) While Beats’ Complaint is vague about the nature
of that relationship beyond that it ultimately deteriorated to the point of an out-of-
court settlement in which Messrs. Iovine and Young were assigned exclusive rights
in the trademark “Beats by Dr. Dre,” the demurrer Beats filed to Mr. Lamar’s cross-
claims in state court is not:
In early 2006, Iovine, Dre, Pentagram Design, Inc. (“Pentagram”), and
Lamar participated in the design of certain audio headphones to be
marketed under the “Beats by Dre” brand. The working relationship
of the parties deteriorated, resulting in a 2006 lawsuit filed in Los
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Angeles Superior Court by Iovine and Dre against Lamar . . . alleging
breach of contract, unjust enrichment, and unfair competition . . . .
(RJN Exh. B [“Demurrer”] at 2.)3 The demurrer continues:
The parties ultimately reached an out-of-court settlement, and under
the terms of a global settlement of the 2006 lawsuit, the Lamar Parties
and Pentagram agreed to assign to Iovine and Dre their rights in the
headphone depicted in Schedule I of a contemporaneously executed
royalty agreement between Iovine, Dre, and Pentagram. The
headphone that was the subject of the 2006 lawsuit and that was
depicted in Schedule I of the royalty agreement was later released
under the product name “Studio” and under the trademark “Beats by
Dre.”
(Demurrer at 2–3.) The settlement agreement to the 2006 lawsuit between Messrs.
Iovine, Young, and Lamar, among others, similarly acknowledges Mr. Lamar’s role
in the founding of the Beats brand. (See RJN Exh. C [“2006 Global Settlement
Agreement”] at 1 (“Lamar . . . [Iovine] and/or [Young] designed certain
headphones . . . to be marketed and sold under certain names and trademarks
including, but not limited to, “Beats by Dr. Dre.”).) Indeed, that settlement
included a contemporaneously executed royalty agreement under which Mr. Lamar
received royalties for his role in designing and developing the Beats brand.4 (See
Cross-Compl. Exhs. 1, 3.)
3 Like Mr. Lamar’s state court cross-complaint, the demurrer filed by Beats in state
court is a matter of public record and may be subject to judicial by this court pursuant to Federal Rule of Evidence 201. 4 As discussed below, that settlement agreement is at the center of Mr. Lamar’s
claim in state court that Beats breached its contractual obligation to him by failing to pay royalties for models of Beats headphones released after the original “Studio” headphone, including the “Solo, Pro, Wireless, Mixr, ‘remastered’ Studio, and Studio Wireless headphones, all of which were based on the original Beats headphones prototypes” Mr. Lamar helped develop in 2006. (See Cross-Compl. ¶ 28.)
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In light of this relationship between the parties, it is wholly implausible for
Beats to now contend that Mr. Lamar was not a co-Founder of its brand image and
headphones line, or that consumers are being deceived by Mr. Lamar’s accurate
statement of his role in the founding of the Beats business in 2006. There is simply
no set of facts that can allow Beats to plead a claim that Mr. Lamar is engaging in
false advertising regarding his uncontested role in the early development of the
Beats brand and headphone line.5 The Complaint should therefore be dismissed
with prejudice.
B. Beats’ Complaint Should be Dismissed Because It Should
Have Been Filed as a Compulsory Cross-Claim to Mr.
Lamar’s State Court Action
“Federal courts will not permit an action to be maintained where the claims
asserted should have been brought as a compulsory counterclaim in an earlier
action.” In re Crown Vantage, Inc., 421 F.3d 963, 973 n.7 (9th Cir. 2005) (citing
Cheiker v. Prudential Ins. Co., 820 F.2d 334 (9th Cir. 1987)). The rule is true
whether the earlier action was brought in federal court or state court. See Cheiker,
820 F.2d at 336. In either instance, the goal is the same—minimize the wasteful
duplication of effort by multiple courts being asked to rule on related issues. See id.
Where the initial action was filed in state court—as here—federal courts
should apply state law to determine if the claims before them should have been
filed as counterclaims in the state court action. See Pochiro v. Prudential Ins. Co.
of America, 827 F.2d 1246, 1249 (9th Cir. 1986) (applying Arizona state law).
5 As noted above, because Beats’ other causes of action—for unfair competition
under the Lanham Act, and for false advertising and unfair competition under California law—are similarly premised on the alleged falsity or misleading nature of Mr. Lamar’s description as a “co-Founder of Beats by Dre,” they too fail to state a claim upon which relief can be granted. See Cleary v. News Corp., 30 F.3d 1255, 1262–63 (9th Cir. 1994) (noting that the Ninth Circuit “has consistently held that state common law claims of unfair competition and actions pursuant to California Business and Professions Code § 17200 are ‘substantially congruent’ to claims made under the Lanham Act.”).
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Under California law, “if a party against whom a complaint has been filed and
served fails to allege in a cross-complaint any related cause of action which (at the
time of serving his answer to the complaint) he has against the plaintiff, such party
may not thereafter in any other action assert against the plaintiff the related cause of
action not pleaded.”6 Cal. Civ. Proc. Code § 426.30. The statute requires courts to
analyze two questions: (1) whether the current claims are related to those asserted
in the prior suit, and (2) if so, whether the current claims are nonetheless
maintainable because they were not in existence at the time the state court
defendant served its answer to the cross-complaint. See Align Tech., Inc. v. Bao
Tran, 179 Cal. App. 4th 949, 960 (2009).
1. Beats’ federal claims are logically related to Mr. Lamar’s
state court claims
California law defines a “related cause of action” as any “cause of action
which arises out of the same transaction, occurrence, or series of transactions or
occurrences as the cause of action which the plaintiff alleges in his complaint.”
Cal. Civ. Proc. Code § 426.10. Applying the definition, California courts have
looked to federal cases construing the compulsory counterclaim requirement
outlined in Federal Rule of Civil Procedure 13(a) for guidance, and have followed
federal courts in adopting the “logical relationship” test as their benchmark for what
constitutes a related cause of action. See Currie Med. Specialties, Inc. v. Bowen,
136 Cal. App. 3d 774, 777 (1982) (citing United Artists Corp. v. Masterpiece
Prods., 221 F.2d 213 (2d Cir. 1955)); see also Align Tech, Inc., 179 Cal. App. 4th
at 959. That test requires that for two claims to be related, there need not be “an
absolute identity of factual backgrounds for the two claims, but only a logical
6 California has abolished use of the term “counterclaims,” and instead refers to all
former counterclaims as cross-claims. Cal. Civ. Proc. Code § 426.10(c). The terms are used interchangeably here, depending on the context, state or federal, in which they arose.
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relationship between them.” Currie Med. Specialties, Inc., 136 Cal. App. 3d at 777
(“At the heart of the approach is the question of duplication of time and effort; i.e.,
are any factual or legal issues relevant to both claims?”); see also Pochiro, 827 F.2d
at 1249 (describing the parallel “logical relationship” test under Federal Rule of
Procedure 13(a) as asking “whether the essential facts of the various claims are so
logically connected that considerations of judicial economy and fairness dictate that
all the issues be resolved in one lawsuit.”).
As with federal law, California’s rule is guided by the simple principle that
“[t]he law abhors a multiplicity of actions.” Align Tech., Inc., 179 Cal. App. 4th at
959. As such, to effectuate its purpose, “numerous cases have held that the
compulsory cross-complaint statute . . . must be liberally construed.” Id. (citing
cases). Indeed, the reach of the “logical relationship” test that emanates from it has
been described as “expansive.” See Currie Med. Specialties, Inc., 136 Cal. App. 3d
at 777.
Applying that test here, it is clear that Beats’ claims before this Court are
logically related to those presented by Mr. Lamar to the state court. Beats’ claims
before this Court necessarily rest on the position that despite Mr. Lamar’s early role
in the development of the “Beats by Dr. Dre” brand and headphone line, he cannot
be considered a “co-Founder of Beats by Dre.” As described above, Beats’
demurrer in the state court, as well as the settlement agreement between the parties
and the context from which it arose, all contradict that position. (See, e.g.,
Demurrer at 2–3 (“In early 2006, Iovine, Dre, Pentagram Design, Inc.
(“Pentagram”), and Lamar participated in the design of certain audio headphones to
be marketed under the “Beats by Dre” brand.”)). Additionally, they present Mr.
Lamar’s first defense to Beats’ false advertising and unfair competition claims
here—that he cannot be held liable for describing himself as a “co-Founder of
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MEMORANDUM OF POINTS & AUTHORITIES IN SUPPORT OF MOTION TO DISMISS COMPLAINT
Beats” because he was, in fact, a co-founder of the headphone brand.7 See
Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997)
(describing that the first element of a Lanham Act claim for false advertising is that
the defendant made a false statement of fact). Indeed, Mr. Lamar could not have
been sued by Messrs. Iovine and Young for the alleged breach of an oral contract
related to the development of the Beats by Dre headphones line, and could not have
entered into a settlement of that case, if that were not true.
Importantly, that same factual context and that same settlement agreement
are vital to Mr. Lamar’s claims in the state court. (See Cross-Compl. ¶¶ 13–25.) In
state court, Mr. Lamar is arguing that when he collaborated with Messrs. Iovine and
Young on the concept and design for Beats branded headphones, the parties
envisioned a broad business model that included a wide range of headphone
products sold in a “variety of sizes, shapes, and colors and/or with a variety of
features, all of which were based on the iconic product design and brand identity in
the original Beats Headphones prototypes.” (Cross-Compl. ¶ 16.) At issue is
whether the settlement agreement in which Beats acquired its rights in the “Beats
by Dre” mark reflects such a vision. To prove his position that it does, Mr. Lamar
will necessarily rely on evidence relating to his early role in the development of the
Beats concept and bread. As noted above, that same evidence will be presented by
Mr. Lamar in defense of Beats’ allegations of false advertising and unfair
competition.
The factual and evidentiary overlap between the state and federal court cases
is dispositive. While there is not, of course, a complete identity between the facts
7 Beats’ Complaint muddles two distinct concepts—that of “Beats by Dr. Dre” the
trademark, and “Beats Electronics, LLC” the company. To clarify, the “Beats by Dr. Dre” mark was in use as early as 2006 as the brand name under which the iconic headphone products would be sold. (See, e.g., Compl. ¶18.) Beats Electronics, LLC was registered as a corporate entity several years after the “Beats by Dre” mark was developed. (See Compl. ¶ 31.)
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of the two cases, and the legal questions are somewhat distinct, there is a logical
relationship between them. The test need not even be “liberally construed” to reach
such a conclusion. Compare Albright v. Gates, 362 F.2d 928 (9th Cir. 1966)
(holding that in an action in which plaintiff alleged that defendants had slandered
him regarding his sale of oil securities, defendants’ counterclaim for the price they
had paid plaintiff for allegedly worthless oil securities arose out of the same
transaction). Allowing the two cases to proceed independently would require the
state court and this Court to evaluate much of the same evidence, hear many of the
same witnesses, and interpret many of the same facts. Such a result would defeat
the purpose of California’s compulsory cross-claim statute, i.e. to conserve judicial
resources by preventing two different courts from needlessly reviewing claims
arising out of a logically related factual context.
2. Beats’ federal claims arose before service of its answer in the
state court action
The second part of the section 426.30 test requires only that the claims
asserted by the plaintiff in the second action were available to it to be asserted as
cross-claims in the prior state action. See Align Tech, Inc., 179 Cal. App. 4th at
960. Here, there is no doubt that the claims asserted by Beats in this Court were
available to it before Beats served its answer to Mr. Lamar’s state court cross-
complaint. Indeed, while Beats has not yet served an answer to Mr. Lamar’s state
court cross-claims, its claims of false advertising and unfair competition against Mr.
Lamar allegedly arose on September 4, 2014 when a press release associated with
Mr. Lamar’s new headphones venture referred to him as a “co-Founder of Beats by
Dr. Dre.” (See Compl. ¶ 23.) There is no reason that Beats’ claims before this
Court could not be asserted in the state court action.
V. CONCLUSION
Given the nature of the relationship between the parties, and Mr. Lamar’s
early role in the development of the Beats brand, Beats cannot now plausibly allege
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MEMORANDUM OF POINTS & AUTHORITIES IN SUPPORT OF MOTION TO DISMISS COMPLAINT
that it is a violation of the Lanham Act or California law for Mr. Lamar to be
described as a “co-Founder of Beats by Dr. Dre.” Its Complaint should be
dismissed on that basis alone. But even leaving aside the ultimately meritless
nature of Beats’ claims against Mr. Lamar in this Court, its Complaint further fails
to state a claim upon which relief may be granted because each of the claims
contained within it are compulsory cross-claims to those already asserted by Mr.
Lamar in state court. Either way, Beats’ claims should be dismissed with prejudice.
Dated: November 21, 2014 STEPHEN E. MORRISSEY BRIAN MELTON SUSMAN GODFREY L.L.P.
RAVI DOSHI (297851)
SUSMAN GODFREY L.L.P.
1901 Avenue of the Stars, Suite 9100
Los Angeles, California 90067
Telephone: (310) 789-3100
Facsimile: (310) 789-3150
By: /s/ Stephen E. Morrissey
Stephen E. Morrissey Attorneys for Defendants Steven Lamar and ROAM, Inc.
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1 COMPLAINT
DAVID M. WALSH (SB# 120761)WENDY J. RAY (SB# 226269) KAI S. BARTOLOMEO (SB# 264033) ADAM M. SEVELL (SB# 266428) [email protected] [email protected] [email protected] [email protected] MORRISON & FOERSTER LLP 707 Wilshire Boulevard, Suite 6000 Los Angeles, CA 90017-3543 Telephone: (213) 892-5200 Facsimile: (213) 892-5454
Attorneys for Plaintiff BEATS ELECTRONICS, LLC
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
BEATS ELECTRONICS, LLC,
Plaintiff,
v.
STEVEN LAMAR; ROAM, LLC; ROAM, INC; and DOES 1-10, inclusive,
Defendants.
Case No. 2:14-cv-7537
COMPLAINT FOR DAMAGES AND INJUNCTIVE RELIEF FOR:
(1) False Advertising (15 U.S.C. § 1125(a))
(2) Unfair Competition
(15 U.S.C. § 1125(a)) (3) False Advertising
(Cal. Bus. & Prof. Code §§ 17500, et seq.)
(4) Unfair Competition (Cal. Bus. & Prof. Code §§ 17200, et seq.)
DEMAND FOR JURY TRIAL
Plaintiff Beats Electronics, LLC (“Beats”) for its complaint against
defendants Steven Lamar (“Lamar”), ROAM, LLC, ROAM, Inc. (together
“ROAM”), and Does 1-10 avers as follows:
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PRELIMINARY STATEMENT
1. Plaintiff Beats is a cutting-edge consumer electronics company that
creates and sells, among other things, high quality headphones under the “Beats”
and “Beats by Dr. Dre” trademarks. To capitalize on Beats’ strong reputation at the
time of ROAM’s launch of a competing headphone line, Defendants made false and
misleading claims regarding Lamar’s association with Beats and “Beats by Dr.
Dre” in connection with Defendants’ marketing of their new headphones.
2. Specifically, on or about September 4, 2014, Defendants began falsely
and misleadingly claiming that Lamar is a “Beats Electronics Co-Founder” or a
“co-founder of Beats by Dr. Dre.” Defendants also falsely and misleadingly
claimed that one of Lamar’s companies, Jibe Audio, LLC (“Jibe Audio”), was
responsible for the “concept, design, manufacturing and distribution of the Beats by
Dr. Dre headphone product line.”
3. Defendants’ claims are false and misleading because Lamar is not a
“co-founder” of Beats Electronics, LLC: he does not have—nor has he ever had—
any ownership interest in the company. Moreover, Jibe Audio was not responsible
for the “concept, design, manufacturing and distribution” of Beats’ headphones.
4. Following Defendants’ false and misleading claims, third-party
articles, Tweets, and blog-postings inaccurately referred to Lamar as a “co-founder”
or an “employee” of Beats. Lamar perpetuated these inaccuracies by Tweeting
direct links to these stories.
5. Although Defendants have removed some of these false and
misleading claims from social media and online sources, there remain false and
misleading statements on ROAM’s website and on Lamar’s social media profiles.
On information and belief, Defendants have taken no steps to inform the public that
these statements were incorrect.
6. Defendants’ false and misleading statements are clearly intended to
draw a connection between the well-known and extremely successful Beats brand
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3 COMPLAINT
and ROAM’s new ROPES headphones, to Defendants’ commercial benefit.
7. Defendants’ false and misleading statements have caused confusion as
to the relationship between Beats and Defendants and have unlawfully associated
ROAM’s ROPES headphones with Beats’ headphones.
I. JURISDICTION AND VENUE
8. This Court has subject matter jurisdiction over this action pursuant to
15 U.S.C. § 1121 (action arising under the Lanham Act) and 28 U.S.C. § 1367
(supplemental jurisdiction).
9. Venue is proper in this judicial district pursuant to 28 U.S.C.
§ 1391(b)(2) because a substantial part of the events giving rise to the claim
occurred in this judicial district.
II. PARTIES
10. Plaintiff Beats is a limited liability company organized under the laws
of Delaware, with its principal place of business at 1601 Cloverfield Boulevard,
Suite 5000N, Santa Monica, California 90404. Beats was acquired by Apple Inc.
on August 1, 2014. Press coverage of the acquisition was, and continues to be,
extensive.
11. On information and belief, Defendant Lamar, an individual, is a
founder of Defendants ROAM, LLC and ROAM, Inc. On information and belief,
Lamar resides in Belvedere Tiburon, California.
12. Defendant ROAM, LLC is a limited liability company organized under
the laws of California. On information and belief, ROAM, LLC’s headquarters is
located in Belvedere Tiburon, California.
13. Defendant ROAM, Inc. is a Delaware corporation organized under the
laws of Delaware, whose registered agent is United States Corporation Agents, Inc.,
located at 1521 Concord Pike, Suite 301, Wilmington, Delaware 19803.
14. Defendants Does 1-10 are persons or entities whose identities and
roles are unknown, who are associated with one or more of the Defendants and, on
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4 COMPLAINT
information and belief, are residents of, or will be present in, the State of California
and this judicial district or have transacted business in the State of California during
the time period covered by this Complaint, and are subject to the jurisdiction of this
Court. Beats will amend its Complaint to include the name or names of said
persons or entities when that information becomes readily available.
III. STATEMENT OF FACTS
BACKGROUND
15. Beats was co-founded by legendary artist and producer Andre Young
(professionally known as “Dr. Dre”) and Jimmy Iovine, former Chairman of
Interscope Geffen A&M Records. Beats has developed revolutionary headphones
with the capacity to reproduce the full spectrum of sound that musical artists and
producers hear when producing music.
16. In or about early 2006, Dr. Dre and Mr. Iovine were collaborating on
designing and developing a new and innovative headphone. Defendant Lamar was
introduced to Dr. Dre and Mr. Iovine, and the three engaged in some discussions
about working with Lamar’s company, SLS International, Inc. (“SLS”).
17. After Dr. Dre, Mr. Iovine, and Lamar agreed to collaborate on
producing the headphone, Lamar breached the oral agreement.
18. In response, Mr. Iovine and Dr. Dre sued Lamar, SLS, Jibe Audio, and
other entities in July 2006. The parties settled that dispute on April 24, 2007. As
part of the settlement, all rights, title, and interest in the headphone design and the
trademark “Beats by Dr. Dre” were assigned exclusively to Dr. Dre and Mr. Iovine.
Dr. Dre and Mr. Iovine have had no further relationship with Lamar, SLS, or Jibe
Audio since the settlement of the 2006 lawsuit.
19. Beats’ first headphone model, the original Studio Headphone, was
released in the fall of 2008, more than two years after Dr. Dre’s and Mr. Iovine’s
brief collaboration with Lamar ended.
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5 COMPLAINT
20. The original Studio Headphones, and the other headphones and
products that Beats has developed, designed, and sold since the original Studio
Headphones were introduced, have enjoyed tremendous popularity and sales. Beats
headphones were featured with Dr. Dre in commercials, and have been endorsed in
commercials by numerous performing artists, including William Adams
(professionally known as “will.i.am”), Justin Bieber, Lady Gaga, and Ellie
Goulding. Beats headphones have also been endorsed by famous athletes, such as
basketball superstars LeBron James and Kevin Garnett, tennis star Serena Williams,
and football superstars Colin Kaepernick and Richard Sherman. Beats headphones
are regularly worn by collegiate and professional athletes during nationally
broadcasted sporting events, including the Super Bowl and the NBA Playoffs.
High-profile fashion designers Fendi and Alexander Wang have designed special
edition Beats headphones. Popular magazines, such as Time, Vibe, and ESPN The
Magazine, have featured articles on Beats. Popular websites such as
Coolspotters.com have pages listing the numerous celebrities wearing or using
Beats headphones. These celebrity endorsements have given Beats’ headphone
products an aura of “coolness” unique in the headphone market, which Defendants
are attempting to capture through their false and misleading statements linking
Defendants’ planned new products to Beats.
21. Apple announced its intention to acquire Beats in May 2014, and that
it expected the transaction to close by September 2014. After Apple’s
announcement through the transaction’s closing on August 1, 2014, there was
extensive publicity and press coverage of the deal, including on television, radio,
and the Internet, and in publications such as the Los Angeles Times, the San Jose
Mercury News, the San Francisco Chronicle, and the New York Times.
22. On information and belief, Defendants timed the announcement of
their competing headphones to coincide with the enhanced publicity regarding
Beats resulting from Apple’s acquisition of Beats. Specifically, Defendants first
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6 COMPLAINT
announced their new headphones on September 4, 2014, approximately one month
after Apple’s acquisition of Beats, even though ROAM’s headphones will not be
available until November 20, 2014.
DEFENDANTS’ FALSE AND MISLEADING STATEMENTS
23. On September 4, 2014, ROAM issued two press releases announcing
that it would be accepting pre-orders for its first headphone product—ROPES—
starting on September 5, 2014. ROAM included an inaccurate and misleading
representation that Lamar was a “co-founder” of Beats by Dr. Dre in each of those
press releases. The press releases were available on ROAM’s website,
www.ROAMwith.com, as well as on MarketWired and PRNewswire. On
information and belief, Defendants recently revised the two press releases by
deleting the misrepresentation that Lamar was a “co-founder” of “Beats by Dr. Dre”
in each of those press releases. Attached hereto as Exhibits 1 and 2 are true and
correct copies of ROAM’s September 4, 2014 press releases. Exhibits 3 and 4 are
true and correct copies of ROAM’s revised press releases as of September 22, 2014.
24. Until September 24, 2014, Lamar’s CrunchBase profile falsely and
misleadingly described him as a “Beats Electronics Co-Founder.” The claim was
listed under the section entitled “Person Details” and includes images of Beats’
trademark logos “b” and “beats by dr. dre.” On September 24, 2014, the statement
was partially revised. The profile now falsely and misleadingly claims that Jibe
Audio is “responsible for the concept and design of the Beats by Dr. Dre headphone
product line.” Exhibits 5 and 6 are true and correct copies of excerpts from
Lamar’s CrunchBase profile as of September 22 and September 24, 2014.
25. Until approximately September 22, 2014, the “Our Story” page on the
ROAM website had a prominent and misleading title which stated: “STEVEN
LAMAR is the co-founder of Beats by Dr. Dre,” adjacent to a photo of Lamar.
Exhibits 7 and 8 are true and correct copies of excerpts from ROAM’s website as of
September 14 and September 22, 2014.
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26. Until September 15, 2014, the “Our Story” page on the ROAM
website falsely stated that “Steven Lamar is the founder of Jibe Audio, LLC, which
was responsible for the concept, design, manufacturing and distribution of the Beats
by Dr. Dre headphone product line.” On or about September 22, 2014, the
statement was partially revised. The website now falsely and misleadingly claims
that “Steven Lamar is the founder of Jibe Audio, LLC, which was responsible for
the concept and design of the Beats by Dr. Dre headphone product line.” Lamar
also made the same false claim about the role of Jibe Audio on his LinkedIn profile.
Exhibits 7 and 8 are true and correct copies of excerpts from ROAM’s website as of
September 14 and September 22, 2014.
27. Until approximately September 22, 2014, Lamar’s LinkedIn profile
and his Twitter profile misleadingly described Lamar as a “co-founder” of Beats by
Dr. Dre or Beats by Dre. On the Twitter profile, Lamar listed this claim
immediately under the statement that he is “Founder – ROAM.” Exhibits 9 and 10
are true and correct copies of excerpts from Lamar’s Twitter profiles as of
September 14 and September 22, 2014.
28. On September 8 and September 10, 2014, Lamar misleadingly claimed
that he was a “Beats by Dre Co-founder” in his Tweets about ROAM’s new
ROPES headphones. See Exhibit 9 (Lamar’s September 14, 2014 Twitter profile).
These false statements remain on his Twitter account.
DEFENDANTS HAVE CAUSED CONFUSION ABOUT LAMAR’S RELATIONSHIP WITH BEATS AND ITS PRODUCTS
29. As a result of these repeated misrepresentations that Lamar is a “co-
founder of Beats by Dr. Dre” and a “Beats Electronics Co-Founder,” and that his
company Jibe Audio was responsible for the “concept, design, manufacturing and
distribution” of Beats by Dr. Dre headphones, third parties are inaccurately
referring to Lamar as a co-founder of Beats, and at least two publications have
recently described him as an employee of Beats, neither of which is true.
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30. Specifically, on September 4, 2014, the day ROAM issued the two
press releases describing Lamar as a co-founder of Beats by Dr. Dre and that Lamar
Tweeted a link to the www.ROAMwith.com website with the inaccurate and
prominent claim that he was a co-founder of “Beats by Dre,” numerous third parties
published or Tweeted articles that described Lamar as a Beats co-founder or Beats
employee, all made in the context of marketing and advertising his new and
competing product.
(a) On September 4, 2014, Business Insider published an article
titled “An Early Beats Employee Who Sued The Company For Cutting Him Out Of
Royalties Is Now Selling His Own $299 Headphones,” which referred to
Mr. Lamar as an “early Beats employee.” Business Insider even notes that in one
of the ROAM press releases “Lamar calls himself a ‘Beats by Dr. Dre co-founder.’”
Attached hereto as Exhibit 11 is a true and correct copy of the Business Insider
article.
(b) On September 4, 2014, The Verge published an article
describing Lamar as a “disgruntled Beats cofounder” and as “one of the company’s
earliest employees.” Attached hereto as Exhibit 12 is a true and correct copy of The
Verge article.
(c) On September 4, 2014, BGR published an article describing
Lamar as a “Beats cofounder” and stating that Lamar “has broken away from his
former company”—referring to Beats. Attached hereto as Exhibit 13 is a true and
correct copy of the BGR article.
(d) On or about September 4, 2014, additional articles with similar
inaccurate statements appeared on at least the following websites: LockerDome,
Engadget, and Gizmodo. Attached hereto as Exhibits 14, 15, and 16 are true and
correct copies of excerpts of these websites.
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9 COMPLAINT
(e) Tweets about the newest headphones from a “Beats cofounder”
came from Engadget, Gizmodo and ZombiD and were subsequently re-Tweeted by
Lamar. See Exhibits 9 and 10 (Lamar’s Twitter profile).
(f) Highsnobiety Tweeted about “Beats’ co-founder’s” new
headphones, and Lamar re-Tweeted that Tweet. See Exhibits 9 and 10 (Lamar’s
Twitter profile). On its website, Highsnobiety even includes a link to an article
about ROAM’s new ROPES headphones in its listing of articles about Beats’
products, so that if one is searching for information about Beats’ products on the
Highsnobiety website, the first article that is listed is about Defendants’ new
competing ROPES headphone products. Attached hereto as Exhibit 17 is a true and
correct copy of an excerpt from the Highsnobiety website.
(g) Gear Hunger Tweeted about “Beats’ co-founder’s” new
headphones, and Lamar also re-Tweeted that Tweet. See Exhibit 9 and 10 (Lamar’s
Twitter profile).
(h) ThisThatNew published an article following Defendants’
misstatements entitled “Beats by Dre Cofounder Launches ROAM Ropes.” That
article starts off describing Lamar as “Ousted Beats by Dre cofounder” and then
goes on to discuss ROAM’s new competing ROPES headphones. Attached hereto
as Exhibit 18 is a true and correct copy of ThisThatNew’s article.
(i) An article that SuperCompressor published following
Defendants’ misstatements had a title that copied the language of the Tweet
verbatim: “Badass Necklace Headphones From A Beats By Dre Co-Founder.”
Attached hereto as Exhibit 19 is a true and correct copy of the SuperCompressor
article.
31. Defendants’ misleading statements that Lamar co-founded “Beats by
Dr. Dre” and that he was a “Beats Electronics Co-Founder” have led others to
believe that he was a co-founder of Beats even though Lamar had no relationship
with Mr. Iovine or Dr. Dre after the 2006 lawsuit was settled, and certainly did not
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join them to co-found a new company—Beats Electronics, LLC—18 months later,
in October 2008. Moreover, Lamar’s company, Jibe Audio, never manufactured or
distributed any Beats headphones, nor was it responsible for the headphones’
concept and design. In fact, Jibe Audio was not even established until after the first
design patent was filed for Beats’ headphone products. Compare Exhibit 20 (U.S.
D552,077 S filed June 13, 2006) with Exhibit 21 (Registration date for Jibe Audio
dated July 5, 2006).
32. The fact that third parties have interpreted Defendants’ statements to
mean that Beats is Lamar’s “former company,” that Lamar was one of Beats’
“earliest employees,” and that Lamar was a co-founder of Beats itself demonstrates
the deceptive, confusing and misleading nature of Defendants’ claims, all in
connection with the marketing and advertising of Defendants’ new and competing
product.
DEFENDANTS ACTED WILLFULLY AND WITH AN INTENT TO CAUSE CONFUSION, MISTAKE AND/OR DECEPTION
33. On information and belief, Defendants’ claims that Lamar was a co-
founder of Beats Electronics and Beats by Dr. Dre, and that Lamar’s company Jibe
Audio was responsible for the concept, design, manufacture and distribution of
Beats headphones, are clearly intended to draw a connection between the well-
known and extremely successful Beats brand and ROAM’s new ROPES
headphones, to Defendants’ commercial benefit.
34. On information and belief, Defendants’ efforts to mislead the public
and tie the success of the Beats headphones to the launch of ROAM’s new
headphone line have been successful: the third-party articles and Tweets described
above discuss the launch of ROAM’s new ROPES headphones while also
describing Lamar as a Beats co-founder. The articles and Tweets also use the
phrase “co-founder of Beats,” or similar language, which gives unwarranted
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legitimacy to ROAM’s headphones. Consumers can order the competing ROPES
headphones through links to ROAM’s website contained in many of the articles.
BEATS IS BEING IRREPARABLY HARMED
35. As a result of Defendants’ false and misleading statements, consumers
searching for information about Beats products are likely to find information about
Defendants’ products and links to the ROAM website, where Defendants’
competing headphones can be ordered. On information and belief, such consumers
are likely to draw an association between Beats’ successful headphones and
ROAM’s new headphone products, leading them to believe that Defendants’
untested new headphones are of the same high quality as Beats’.
36. On information and belief, consumers who are confused or deceived
into believing that there is an association between the ROAM product line and the
successful Beats by Dr. Dre products may decide to order Defendants’ competing
headphones instead of purchasing Beats’ products, causing Beats to lose sales.
37. On information and belief, consumers who test or buy Defendants’
headphones and are dissatisfied with their quality will associate that lower quality
with Beats’ headphones as a result of Defendants’ claims that Lamar, who also
identifies himself as the founder of ROAM, was a co-founder of Beats Electronics
and Beats by Dr. Dre.
38. If Defendants continue their false and misleading representations that
Lamar was a co-founder of Beats Electronics and Beats by Dr. Dre and that
Lamar’s company, Jibe Audio, was responsible for the concept, design,
manufacture and distribution of Beats by Dr. Dre products, Beats will be
irreparably harmed, including through loss of goodwill, reputation, market share,
and revenue. Such irreparable harm will continue unless Defendants are restrained
from making false representations about the nature of Defendants’ relationships
with Beats and remove all misleading statements from all public locations,
including but not limited to social media and online.
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FIRST CLAIM FOR RELIEF
(False Advertising, Lanham Act Section 43(a), 15 U.S.C. § 1125(a))
39. Beats incorporates the allegations in paragraphs 1 through 38 above, as
if set forth fully herein.
40. Defendants have misrepresented their relationship with Beats.
Defendants have misleadingly stated that Lamar was a “co-founder” of Beats by
Dr. Dre and Beats Electronics, and have falsely stated that Lamar’s company, Jibe
Audio, was responsible for the concept, design, manufacture and distribution of
Beats by Dr. Dre headphones.
41. Defendants’ statements were made in two press releases, on ROAM’s
website, and through social media to promote Defendants’ new competing ROPES
headphones.
42. Defendants’ statements have misled, or have the tendency to mislead,
a substantial segment of the consumer electronics market.
43. Defendants’ statements are deliberate and intentional
misrepresentations of material facts. Lamar was not a co-founder of Beats. Jibe
Audio never manufactured or distributed Beats by Dr. Dre headphones, nor was it
responsible for the concept or design.
44. Defendants caused their false and misleading statements to enter
interstate commerce.
45. Defendants’ false statements and misrepresentations of the nature,
characteristics, and qualities of Defendants’ commercial activities have harmed and
are likely to continue to harm Beats by the diversion of sales from Beats to ROAM.
46. The conduct alleged above constitutes false advertising, in violation of
Section 43(a) of the Lanham Act (15 U.S.C. § 1125(a)).
47. Defendants’ acts have caused, and will continue to cause, substantial
monetary harm to Beats, and have damaged Beats’ reputation and goodwill,
including the goodwill associated with the Beats by Dr. Dre brand. Defendants’
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activities, unless restrained, will continue to cause further irreparable injury to
Beats and the Beats by Dr. Dre brand for which Beats has no adequate remedy at
law.
48. On information and belief, Defendants undertook the acts described
herein with full knowledge and intent to cause harm to Beats.
SECOND CLAIM FOR RELIEF
(Unfair Competition, Lanham Act Section 43(a), 15 U.S.C. § 1125(a))
49. Beats incorporates the allegations in paragraphs 1 through 48 above, as
if set forth fully herein.
50. Defendants have deliberately and intentionally misrepresented their
relationship with Beats. Defendants have misleadingly stated that Lamar was a
“co-founder” of Beats by Dr. Dre and Beats Electronics, and have falsely stated that
Lamar’s company, Jibe Audio, was responsible for the concept, design,
manufacture and distribution of Beats by Dr. Dre headphones.
51. Defendants caused their false and misleading statements to enter
interstate commerce.
52. Defendants’ statements have caused, or are likely to cause, confusion,
mistake, or deception as to an association between Beats’ successful headphones
and ROAM’s new ROPES headphones, leading consumers to believe that
Defendants’ untested new headphones are of the same high quality as Beats’ and/or
that Beats is affiliated with Defendants or Defendants’ products.
53. The conduct alleged above constitutes unfair competition, in violation
of Section 43(a) of the Lanham Act (15 U.S.C. § 1125(a)).
54. Defendants’ acts have caused, and will continue to cause, substantial
monetary harm to Beats, and have damaged Beats’ reputation and goodwill,
including the goodwill associated with the Beats by Dr. Dre brand. Defendants’
activities, unless restrained, will continue to cause further irreparable injury to
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Beats and the Beats by Dr. Dre brand for which Beats has no adequate remedy at
law.
55. On information and belief, Defendants undertook the acts described
herein with full knowledge of Beats’ rights and with the intent to cause confusion
and harm to Beats and to compete unfairly with Beats.
THIRD CLAIM FOR RELIEF
(False and Misleading Advertising, Cal. Bus. & Prof. Code § 17500, et seq.)
56. Beats incorporates the allegations in paragraphs 1 through 55 above, as
if set forth fully herein.
57. Defendants have made false and misleading statements about their
relationship and/or association with Beats. Defendants have misleadingly stated
that Lamar was a “co-founder” of Beats by Dr. Dre and Beats Electronics, and have
falsely stated that Lamar’s company, Jibe Audio, was responsible for the concept,
design, manufacture and distribution of Beats by Dr. Dre headphones.
58. Defendants knew that these statements were false or misleading, or
should have known them to be false or misleading by the exercise of reasonable
care.
59. Defendants’ statements have misled, or are likely to mislead, a
reasonable consumer into believing that Lamar was a “co-founder of Beats by Dr.
Dre,” that Lamar’s company, Jibe Audio, was responsible for the concept, design,
manufacture and distribution of Beats by Dr. Dre headphones, that Defendants’
untested new headphones are of the same high quality as Beats’ and/or that Beats is
affiliated with Defendants or Defendants’ products.
60. Defendants knew, or in the exercise of reasonable care should have
known, that these statements were misleading or deceptive as set forth herein.
61. The conduct alleged above constitutes false and misleading
advertising, in violation of Section 17500, et seq. of California’s Business and
Professions Code.
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62. Beats has suffered loss of money or property as a result of Defendants’
false and misleading statements. Defendants’ acts have caused, and will continue
to cause, irreparable injury to Beats, including injury to Beats’ reputation and
goodwill and the goodwill associated with the Beats by Dr. Dre brand. Defendants’
activities, unless restrained, will continue to cause further irreparable injury to
Beats and the Beats by Dr. Dre brand for which Beats has no adequate remedy at
law.
FOURTH CLAIM FOR RELIEF
(Unfair Competition, Cal. Bus. & Prof. Code § 17200, et seq.)
63. Beats incorporates the allegations in paragraphs 1 through 62 above, as
if set forth fully herein.
64. California Business & Professions Code § 17200, et seq. (“UCL”)
prohibits any “unlawful . . . business act or practice.” The above-described acts
constitute false advertising and unfair competition under Section 43(a) of the
Lanham Act, 15 U.S.C. § 1125(a) and false advertising under Section 17500 of the
California Business & Professions Code, and are therefore unlawful acts in
violation of the UCL.
65. Beats reserves the right to allege other violations of law, which
constitute other unlawful business acts or practices. Defendants’ conduct is
ongoing and continues to this date.
66. The UCL also prohibits any “unfair or fraudulent business act or
practice.”
67. Defendants’ above-described acts are unfair because Defendants have
made false and misleading statements about their affiliation with Beats in order to
confuse the public and capitalize on Beats’ goodwill, reputation, and prominence in
the market. These acts gave Defendants an unfair competitive advantage and
violated established law and/or public policies which seek to ensure truthful and
accurate statements in advertising, including, inter alia, Section 43(a) of the
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Lanham Act, 15 U.S.C. § 1125(a), and false advertising under Section 17500 of the
California Business & Professions Code. Therefore, Defendants’ acts alleged
herein were and are unfair within the meaning of the UCL.
68. The above-described acts are likely to, and did, mislead or deceive
reasonable consumers into believing that there is an affiliation between Beats and
ROAM, or between Beats’ products and ROAM’s products, and therefore are
fraudulent acts in violations of the UCL.
69. Defendants willfully and intentionally made the false and misleading
statements with an intent to cause confusion or mistake or to deceive consumers
into believing that there is an affiliation between Beats and ROAM, or between
Beats’ products and ROAM’s products.
70. Beats has suffered loss of money or property as a result of Defendants’
unlawful, unfair, and fraudulent business acts and practices. Defendants’ acts have
caused, and will continue to cause, irreparable injury to Beats, including injury to
Beats’ reputation and goodwill and the goodwill associated with the Beats by Dr.
Dre brand. Defendants’ activities, unless restrained, will continue to cause further
irreparable injury to Beats and the Beats by Dr. Dre brand for which Beats has no
adequate remedy at law.
71. Defendants should be required to restore to Beats any and all profits
earned as a result of their unlawful, fraudulent and unfair actions, or provide Beats
with any other restitutionary relief as the Court deems appropriate.
PRAYER FOR RELIEF
WHEREFORE, Beats prays for judgment as follows:
1. That the Court preliminarily and permanently enjoin Defendants, their
officers, agents, servants, employees, attorneys, and all others in active concert or
participation with them from:
(a) Making false or misleading statements with respect to Lamar’s
purported relationship with Beats or Beats by Dr. Dre, including statements to the
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effect that Lamar was a “co-founder” of Beats or Beats by Dr. Dre or an employee
of Beats or Beats by Dr. Dre;
(b) Making false or misleading statements with respect to Jibe Audio’s
purported involvement with Beats or Beats by Dr. Dre; and
(c) Committing any other unlawful business practices directed toward
obtaining the business and customers of Beats.
2. That the Court preliminarily and permanently order Defendants, their
officers, agents, servants, employees, attorneys, and all others in active concert or
participation with them to remove all statements made on social media sites or
online claiming:
(a) That Defendant Lamar was a “co-founder” of Beats or Beats by Dr.
Dre or an employee of Beats or Beats by Dr. Dre;
(b) That Jibe Audio had any involvement with Beats or Beats by Dr.
Dre; and
(c) Any other false or misleading statements about any of Defendants’
associations with Beats.
3. That the Court order Defendants, their officers, agents, servants,
employees, attorneys, and all others in active concert or participation to remedy
their misstatements by, including but not limited to:
(a) Issuing a public statement correcting Defendants’ earlier
misrepresentations;
(b) Contacting every third party who inaccurately referred to Lamar as
a co-founder of Beats or described him as an employee of Beats to explain that
Lamar was not a co-founder or employee of Beats and that the inaccurate language
should be removed or withdrawn; and
(c) Contacting every third party who inaccurately referred to Jibe
Audio as having any involvement with Beats or Beats by Dr. Dre headphones to
explain that the inaccurate language should be removed or withdrawn.
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4. That the Court award Beats the profits made by Defendants and the
actual damages suffered by Beats as a result of Defendants’ unlawful conduct, in an
amount to be proven at trial.
5. That the Court award Beats treble damages and enhanced profits
pursuant to 15 U.S.C. § 1117(a).
6. That the Court award prejudgment interest on all amounts awarded.
7. That the Court award Beats its costs and attorneys’ fees pursuant to
15 U.S.C. § 1117 and applicable California law.
8. That the Court grant Beats any other remedy to which it may be entitled,
including all remedies provided for in 15 U.S.C. § 1117 and under California law.
9. That the Court award such other relief as it deems just and proper.
DEMAND FOR JURY TRIAL
Pursuant to Rule 38(b) of the Federal Rules of Civil Procedure, Beats hereby
demands trial by jury on all issues raised by the Complaint.
Dated: September 26, 2014 MORRISON & FOERSTER LLP
By: /s/ David M. Walsh David M. Walsh
Attorneys for Plaintiff BEATS ELECTRONICS, LLC
sf-3458054
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