As listening to music on headphones and earbuds has become ubiquitous, it is interesting to note that Koss Corporation (NASDAQ: KOSS) the company that invented and commercialized consumer stereo headphones in 1958, filed a patent infringement suit in July, 2020 against Apple, Bose, and PEAG, LLC (owner of JLab, Skullcandy and Plantronics). The suit alleges intellectual property infringement over Koss’ STRIVA wireless design headphone patent.
Although Apple sees lawsuits filed against it on a regular basis, the Koss lawsuit has significant standing, thanks to the company’s 68 years in the audio industry and its historical claim to pioneering stereo headphones, corroborated by no less an institution than the Smithsonian.
Founded by John C. Koss in 1953, Milwaukee, Wisconsin-based Koss Corp. was originally named The J.C. Koss Hospital Television Rental Company until Koss partnered with engineer Martin Lange in 1958 to create the first stereo headphone, the SP/3 Stereophones. Prior to the SP/3, headphones were used in radio and telephone communications, the military, aviation and other commercial and consumer applications, but they were all monophonic.
John C. Koss.
Ironically, the SP/3’s success was a fluke. It was primarily designed to showcase a then-new portable phonograph, but the SP/3’s ability to give listeners the experience of high-fidelity stereo sound without speakers was a revelation in the Eisenhower era. Music aficionados and audiophiles alike lauded the development, and Koss became a manufacturer of headphones nearly exclusively.
Koss continued to improve and develop the technology in their headphones, resulting in the groundbreaking creation of their first electrostatic headphones: the ESP/6, in 1968. The ESP/6’s enhanced audio fidelity wowed the audiophile world. By applying a currentless electrostatic charge to the ultra-thin-film diaphragm between the condenser plates, the film itself was set in motion by the musical signal to create sound, an entirely different mechanism than conventional headphones that use dynamic drivers. The improved transient response, low distortion and “lifelike” accuracy of sound reproduction characteristic of high-quality electrostatic headphones continues to make them coveted among audiophiles, in spite of the fact they’re not suited for portable use, because electrostatic headphones need to be connected to an external power source.
Koss SP/3 Stereophones. From Koss.com.
The evolution of multitrack recording technology in the 1970s, when overdubbing and isolating the vocal and instrumental tracks became standard practice, required headphones that limited sound leakage. The Koss Pro-4 headphones (later the Pro-4A, Pro-4AA and other iterations) were among the first designs to address these needs. These units would show up in professional recording studios from New York to Los Angeles throughout the 1970s and were adopted by consumers as well. Although using similar electronics as the Pro 4/AA, the Pro 4/AAA pioneered the “D”-shape ear cushions that were ergonomically designed to fit more naturally over the human ear, a convention still in use with many current Koss headphone models.
In fact, I still own a set of vintage Koss Pro4/AAA headphones and will use them for both casual listening and to check mixes, as they sound, at least to my ears, somewhat similar to JBL 4311 speakers, which were used at The Record Plant in New York and other recording studios during the 1970s. The headphones give me a sonic reference to that era of recording and mixing.
The Koss HV1A headphones debuted in 1974, setting another milestone – they were the first dynamic headphones capable of reproducing ten full octaves of music across the audio spectrum.
Koss was the undisputed industry leader in headphones throughout this period, with Telex (long established in the communications industry) as its nearest competitor. The Koss designs were the templates upon which AKG, Sennheiser, and other competitors would base their own models on for much of the era. In 1974, The Tonight Show with Johnny Carson was one of NBC-TV’s top programs. Carson’s bandleader, Doc Severinsen, became the official spokesman for Koss, adding the imprimatur of his televised pro musician gravitas to the brand to boost the company’s sales growth. Koss subsequently branched out with international sales distribution to Paris, Dublin, Amsterdam, Frankfurt, Tokyo and Toronto.
In the 1970s Koss’s original SP/3 headphones also became enshrined as a part of American history with their inclusionary display at the Smithsonian and John Koss’s induction into the Audio Hall of Fame in 1979.
With the emergence of the Sony Walkman and mobile personal audio listening, newer, lightweight Koss headphone designs came to the forefront, including the Porta Pro, which offered better frequency response than its competitors. Koss also made an OEM (Original Equipment Manufacturer) deal with RadioShack to supply the electronics chain with RadioShack-branded Koss headphones, which furthered their ubiquity in American households.
In spite of its technological achievements and brand growth, Koss was not without its roller coaster pratfalls. A former trumpet player with a strong entrepreneurial streak and a stomach for risk-taking, John Koss often took the company to the precipice. The company went public in 1967 with sales of $1 million. Throughout the 1960s, Koss ventured into other product sectors via acquisition, including turntables, telephones and electronics – all of which went belly up. Despite bringing in an experienced outside manager in the 1970s, Koss lost a hefty chunk of its market share leadership to Japanese competition. Another outside manager kickstarted an ill-fated attempt to compete in the 1980s “boombox” arena of portable radio/cassette players, a move that plunged Koss into Chapter 11 bankruptcy with $6 million in losses by 1984.
Paying off over 60 percent of a $14 million debt overhang, John Koss retook the reins and brought his company out of Chapter 11 a year later, refocusing on headphones. At an audio show in July 1986, Koss showcased the first cordless infrared headphones, an innovation that announced the company’s return to its roots and to the audio industry at large. This would become the landmark 1989 Koss JCK/300 Kordless Stereophone System.
Having learned his lesson the hard way about the problems that can come from hiring outside management who lacked experience in the headphone sector niche of the audio industry, John Koss handed the helm to his son Michael in 1991.
Under Michael Koss, the company continued its focus on headphones, which had become a much more competitive and lucrative landscape as the 20th century drew to a close. Koss has continued since 2000 in developing new headphones and earbud models utilizing rare-earth metals, and more advanced wireless connectivity; for example, such as its 2012 STRIVA wireless over-ear headphones, claimed to be the world’s first to use Wi-Fi, and its current BT540i Bluetooth headphones. Koss was even name-checked as a client of the fictional Sterling Cooper ad agency of the hit AMC TV show, Mad Men.
But even with the company back on the right track under Michael Koss, Koss Corporation once again encountered financial difficulties – this time for insider embezzlement.
In 2009, the FBI entered the home of Koss vice president of finance Sujata “Sue” Sachdeva and arrested her for wire fraud and embezzlement of over $34 million. Sachdeva had gone on a frenzied spending spree with the stolen funds, purchasing expensive clothing, jewelry, and other goods in such volume that she needed to rent a storage space. Sachdeva was sentenced to 11 years, of which she served six. Koss was able to recover $12 million of the stolen $34 million. It was nevertheless an embarrassing body blow to the company, which once again took a hit in its stock price as a result.
Which brings us to January 2021. The current lawsuit from Koss against Apple, Bose and PEAG is not one to be taken lightly, even though Apple has filed a countersuit. Koss does have a long history of innovation and had previously issued warnings to the defendant companies, which were ignored. As noted, the Koss STRIVA Wi-Fi headphones date back to 2012, while Apple’s AirPods and Bose’s QuietComfort wireless headphones both premiered in 2016, and PEAG’s first JLab earbuds made their debut in 2018.
Even more telling, Koss stock price has doubled in the past year from around $1.46 to over $3.00 per share at the time of this writing. There is an old Wall Street maxim: “Buy on the rumor and sell on the news.” Although the Dow Jones Index continues to reach new highs, Koss is a relatively little-known company on Wall Street’s radar, with zero analyst coverage, so any buying of the stock would be a hint of a possible settlement or favorable adjudication. This could finally mark an end to Koss’ past financial bumps in the road and pave the way towards future product innovation. After all, Koss has already secured its place in audio history with products that have been beloved by many audiophiles for almost 70 years. In fact, the Koss Pro/4AA is still in production!
Update:
Perhaps due to Koss Corp. also being looked at in the same light as BlackBerry as an ex-trailblazing company now struggling with its competitors, it has benefited during the week of January 25-29, in which GameStop, BlackBerry and Nokia all saw retail investors pouring in with buy orders as a result of social media and taking on Wall Street hedge funds in a David vs. Goliath face-off. Koss Corp.’s stock price started the week at $3.94. By Wednesday it had climbed to $41.84 before noon. It spiked to a high of $108.40 by Thursday morning and closed the week at $64.00.
As this article went to press, the price of Koss stock continued to gyrate for the week of February 1-5. Starting at $60, the price started to topple, ending the day at $35. From there, it would continue to drop and then establish a trading range between $19 and $28, closing out the week at $20.
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