Bloomberg reports that the lawsuit alleges Beats used a "sham transaction to abscond with Monster's technology underlying the headphones, as well as its distribution chain."

Lee owned 5 percent of Beats, but severed ties between Monster and Beats after what he alleges was a fraudulent "change of control" that gave HTC 51 percent ownership of Monster. Those stocks were later sold back to Iovine and Dre for a hefty profit, who in turn sold Beats to Apple for $3 billion.

Lee alleges that Beats have concealed Monster's role in designing and developing the technology to make Beats headphones and that the company's partnership with HTC was a sham that allowed them to move the headphones away from Monster. Lee further alleged that the duo "pirated" his engineering designs for the headphones, which control half of the market.

In a 2013 feature on Gizmodo, Lee revealed that he signed several unfavorable agreements, including one with a option that allowed Beats to take full control of the product, including Monster's engineering and design concepts.

'This is a tragic example of taking advantage of someone else's idea and concept, running off with it, and throwing him under the bus," Joe Cotchett, a lawyer for Lee, said in statement.