Apple Takeover Target Beats Sued by Bose Over Headphones

Jul 25, 2014 4:26 pm ET

(Updates with details from complaint in fourth paragraph.)

July 25 (Bloomberg) -- Bose Corp. filed a patent- infringement action seeking to block U.S. imports of noise- canceling headphones made by Beats Electronics LLC, the company being bought by Apple Inc.

The Beats Studio and Beats Studio Wireless headphones use technology covered by five patents, Bose said in a complaint filed with the U.S. International Trade Commission in Washington yesterday. A mirror civil suit, filed today in federal court in Wilmington, Delaware, makes the same allegations and is likely to be put on hold while the ITC case is pending.

Apple agreed to buy Beats for $3 billion in May, its biggest-ever acquisition, with founders Dr. Dre and music- industry executive Jimmy Iovine joining the iPhone maker. While the deal, projected to close in the current quarter, includes Beats headphones and other hardware, Apple also is getting access to an Internet-based music streaming service.

Bose, based in Framingham, Massachusetts, said it began developing its noise-canceling technology almost four decades ago and started selling its QuietComfort headphones in 2000. The technology in the latest patents, used in more recent models of Bose headphones, involves the use of sound waves to cancel out unwanted noise.

“The inventions covered by the asserted patents arose out of the inventors’ recognition of the unique technical problems associated with constructing improved high-performance noise canceling headphones,” Bose said in the ITC complaint.

Beats Deal

Sarah Joyce, a spokeswoman for Culver City, California- based Beats, said the company doesn’t comment on pending litigation.

Apple Chief Executive Officer Tim Cook went after Beats as music-streaming services, where a customer pays for access to the songs instead of owning them in a digital library, gain in popularity. Spotify Ltd. and Pandora Media Inc. dominate the market, and Apple last year introduced iTunes Radio, an advertising-supported streaming service that competes with Pandora. While Apple’s iTunes remains the world’s largest seller of music, it only offers downloads of single tracks and albums.

Apple plans to keep Beats as a stand-alone brand and the music app that will run on devices based on Google’s Android software and Microsoft Corp.’s Windows operating system, as well as those made by Apple. The purchase is for $2.6 billion with $400 million more that will vest over time.

Bose Suits

Beats introduced its music-subscription service earlier this year. Like Spotify and other rivals, the company offers unlimited access to millions of songs in exchange for a monthly fee. Universal Music was an investor in Beats, along with private equity firm Carlyle Group LP.

Bose has filed other patent suits against rival headphone makers. In February, it filed an ITC complaint to block imports iSport Intensity earbuds made by Monster Cable Products Inc., with the case scheduled for a hearing in October. In 2008, Bose settled a case it had at the ITC against New Zealand’s Phitek Systems Inc. over noise-canceling headphones.

The ITC case is In the Matter of Certain Noise Canceling Headphones and Components Thereof, Complaint No. 3024, U.S. International Trade Commission (Washington) and the civil suit is Bose Corp. v. Beats Electronics LLC., 14cv980, U.S. District Court for the District of Delaware (Wilmington).