Will Beats Add to Apple’s Patent-Infringement Woes?

Andrew Burton/Getty Images

Andrew Burton/Getty Images

It appears that Apple (NASDAQ:AAPL) is getting more than it bargained for with its nearly finalized purchase of Beats Electronics. Besides gaining the company’s premium headphone business and its Beats Music subscription-based music streaming service, the Cupertino-based company will also inherit Beats Electronics’ legal problems. In a Delaware court filing first spotted by CNBC, Bose Corporation alleged that Beats Electronics, LLC and Beats Electronics International Limited are infringing on multiple noise cancelling headphone technology patents that it holds. As noted in the lawsuit, Bose has also filed an identical complaint against Beats with the U.S. International Trade Commission.

The Beats’ products targeted in Bose’s lawsuit include its headphones marketed and sold under the Studio and Studio Wireless brands. As noted by Bose, both product lines use what Beats calls “Adaptive Noise Cancellation.” In the court filing, Bose noted that its own line of noise cancelling headphones uses technology that is “protected by at least 36 U.S. patents and applications (22 patents and 14 pending applications).” Bose noted that its research into noise cancellation technology dates back to 1978, when company founder Dr. Amar Bose found the performance of his airline-supplied headphones to be disappointing. The experience inspired him to research solutions to overcoming background noise in headphones and led to the development of the company’s own noise cancellation technology, known as “active noise reduction,” or ANR. As noted in the lawsuit, Bose’s noise cancellation technology has been widely used for various military and commercial applications.

Bose cited five patents that the Studio and Studio Wireless brands Beats headphones are allegedly infringing on. The patents in suit include the ‘537 patent titled “Method and apparatus for minimizing latency in digital signal processing systems,” the ‘150 patent titled “Dynamically configurable ANR signal processing topology,” the ‘151 patent titled “Dynamically configurable ANR filter block topology,” the ‘992 patent titled “High frequency compensating,” and the ‘888 patent titled “Digital high frequency phase compensation.”

Bose is seeking “equitable relief” and “an injunction that enjoins Beats and Beats’ officers, agents, servants, employees, representatives, successors, and assigns, and all others acting in concert or participation with them, from continued infringement.” The company has also asked for a damages award to compensate for the alleged infringement, which could be increased if Beats’ infringement is found to be “willful.”

Although Apple announced in May of this year that it was purchasing Beats for $3 billion, the acquisition is not expected to be completed until sometime this quarter. While it is not clear if Apple will play any immediate role in this litigation, Bose’s lawsuit will obviously become the iPhone maker’s problem within the next several months.

It is also not clear how significant an impact this could have on Beats’ headphone business if Bose prevails in this lawsuit. Although Bose only targeted two specific Beats product lines, the lawsuit also asked for “an accounting for infringing acts not presented at trial and an award by the Court of additional damages for such acts,” raising the specter of even more patent-infringement charges. It is unknown if Bose would be willing to license its patented noise canceling technology to Beats.

While Apple is acquiring all of Beats’ businesses, many industry watchers believe the company was primarily interested in Beats Music, the subscription-based streaming music service that made its debut in early 2014. Although Apple has long dominated the digital music download market with its iTunes store, digital album and track sales have been falling as on-demand music streams such as Beats Music have been growing in popularity. For this reason, Apple may not be overly concerned with a lawsuit that only targets certain products in Beats’ headphones business. In the meantime, Apple has plenty of other patent-infringement lawsuits to busy itself with, including recent claims that it is infringing on a company’s speech recognition technology, as well as its well-publicized patent battles with rival Samsung (SSNLF.PK).

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