Without Yeezy Ye? Who is the new “sole” owner?

New York
CNN business

“When it starts to get crazy, then run away,” Kanye West once sang. Adidas followed his advice.

Where to start? Following a social media uproar after Adidas cut ties with Ye, the artist known as Kanye West (and formerly known as a billionaire) has joined a long list of brands that have parted ways with the star following his anti-Semitic media tour.

In its statement, Adidas said it would “end production of Yeezy-branded products and stop all payments to Ye and his companies. Adidas will cease the Adidas Yeezy business with immediate effect.”

But scroll down, check out the last paragraph of the company’s announcement and you’ll find an interesting phrase that’s raising eyebrows in the industry (and that seemed to come straight from Adidas’ legal team).

“Adidas is the sole owner of all design rights to existing products, as well as previous and new colorway collaborations.”

Let’s mark this part: “Sole owner of all design rights…”

The Yeezy/Adidas contract isn’t publicly available, but I spoke with several legal experts about the importance of that line and what Adidas can and can’t do going forward.

“The industry standard is that Adidas would own everything, even though Kanye owns his brand,” Shahrina Ankhi-Krol, a New York fashion attorney, told me. I didn’t read the Adidas/Ye contract.

However, the word raises more questions than it answers. While Adidas’ statement permanently closes the door to selling Yeezy-branded products, according to legal experts I spoke with, existing Yeezy designs open the door for them to rebrand Ye sans Ye.

Simply put, “Yeezy” may be owned by Ye. But Yeezy shoe designs are the intellectual property of Adidas.

“They won’t be able to use their trademarks, but they can reuse the designs themselves because they own them,” said Nicole Haff, litigation and entertainment partner at Romano Law. Haff pointed me to this article that delves into Adidas’ patent filings and shows that the company claims ownership of all Yeezy/Adidas designs with one exception: the Yeezy Slides. All of them are Kanye.

Haff told me that the “sole owner” phrase in Adidas’ statement is a legal “warning shot” to Ye. “He’s saying a lot of things to the press, like that his designs have been stolen, and that the money is owed to him,” he said. “I think what’s happening is that Adidas has done its own design [legal] position”.

That legal stance could depend on the morality clause within the Yeezy/Adidas contract, which could give Adidas legal cover to end the deal. “It’s unbelievable that there’s no morality clause,” Haff said. Kanye’s behavior is “absolutely reputational and damaging to the Adidas brand.”

To delve into the legal issues surrounding the Yeezy/Adidas split, Fashion Law has a great write-up.

Now could Yeezy build his Yeezy fashion brand? According to Teri Agins, author of Hijacking the Runway: How Celebrities are Stealing the Spotlight from Fashion Designers, it could be a huge task.

According to Agins, sneaker designs – unlike clothing – are more closely tied to technology and patents, which the shoe giants hold tightly to. “All the properties that make a shoe special, all those things are trademarked,” Agins said. “It doesn’t have the infrastructure … you can’t do that alone.”

Let’s rewind: West publicly ended his two-year partnership with Gap in September. Today the company announced that it will immediately stop selling Yeezy-branded products in its stores and close YeezyGap.com. The site now redirects to Gap’s main website.

Pulling the plug on existing Yeezy merchandise was a no-brainer for the company. It was already a zombie brand because its star designer had publicly left and disparaged the brand.

Unlike Gap, Adidas created a very profitable business selling Yeezy brand products. Adidas’ Yeezy sneakers were among the most prized and influential shoes, often selling for thousands of dollars on the resale market. If you haven’t been following fashion trends for the past decade, you might not be aware of the huge impact Kanye’s Yeezy brand has had.

“There’s probably no one more influential in fashion than Ye in the last decade,” Lawrence Schlossman, host of the menswear podcast Throwing Fits, told me, “which makes his recent nuclear meltdown that much more disappointing.”

With influence came profits, pushing West up the Forbes billionaires list (he’s still fallen) and boosting Adidas’ bottom line. Last month, Cowen analyst John Kernan estimated that the Yeezy brand accounts for 4-8% of Adidas’ revenue. (The company has a market capitalization of around 19.3 billion euros.)

Cowen downgraded the stock on the possibility of a Yeezy partnership dissolution.

Cowen’s analysis was spot on: Adidas shares are down more than 18% since the start of the month. “When it starts going crazy, then run away…run away as fast as you can,” goes a line from the 2010 hit song “Runaway.” But who is running away from whom?


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