UPDATE
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9/5/2022
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Traditional News
September 5, 2022
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5 min read

What We Know About Kanye’s Contract With adidas

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Taking a deep dive into the legal ramifications of Ye’s possible exit from adidas with @SneakerLegal’s Zak Kurtz.

What started as a match made in heaven, adidas and Kanye’s relationship has been put to the test over the last two years. Over the past week, Ye has provided deep insight into what is going on between Ye and the Three Stripes, from his perspective.

Threats have been made by Ye to disembark from the German sportswear giant, claiming adidas has breached their contract by stealing his designs and taking unprecedented creative liberties with the Yeezy brand. In Kanye’s most recent post (which Ye deleted), he goes as far as to create new terms for the contract, stating that adidas owes him $2 billion, and should relinquish their control of Yeezy IP going forward, as well as the Yeezy brand.

While the demands are surprising in their own right, it is the contents of the demands that are most important. Based on the demands and snippets that have been made public over the years, it allows us to deduce the contents of the Yeezy x adidas deal. Follow along as @SneakerLegal’s Zak Kurtz and Sole Retriever’s Nicholas Vlahos break down everything known about Ye’s deal with adidas, the legality of Ye splitting from The Three Stripes, and what this means for the future of his designs as well as the Yeezy brand as a whole.

Images via kanyewest

Who Owns The Yeezy Brand Name?

Ye and his daughter North West at the Yeezy Season 8 Runway Show in Paris, France (2020; Image via NYT)

In the infamous 2019 Forbes interview in which Kanye shared hundreds of Yeezy design samples, the magazine reported that “West still owns 100% of Yeezy.” What Ye is likely referring to here is the Yeezy trademark and brand outside of the adidas Yeezy line, which is the reason that he was able to jump ship back in 2013 and head to adidas in the first place, as Nike was not offering him the creative control or ownership he so desired.

There are plenty of trademark filings with the United States Patent and Trademark Office (“USPTO”) around Yeezy that are outside the realm of adidas. For example, “YZYSPLY” as well as “YEEZY” itself are both owned by Mascotte Holdings, Inc., which is Kanye’s holding company that now encompasses his music, designs, and much, much more. However, most of the sneaker designs have Adidas listed as the owner of the design patent.

In the now-deleted Instagram post that was made public on the day of this writing, Ye put forth demands for a new deal with The Three Stripes, stating in his fourth point, “Ye owns and operates Yeezy going forward.” According to Zak Kurtz of Sneaker Legal,

“it sounds like Ye wants more of a decision making role in the manufacturing of the Yeezy shoes. He wants to decide who manufactures Yeezys, how many they make, and who they collaborate with. He also wants a bigger piece of the pie for making these decisions. Adidas appears to be the manufacturer and is making these decisions currently and Ye is not happy about that.” He continues, “From a high level, Ye and his team design the Yeezys, adidas approves and makes the shoes and gets to put the Yeezy name on them while Kanye gets a portion of the revenue. Like a licensing deal but with a revenue sharing aspect that gives Ye more money than the typical agreement. Ye now wants to flip the script and make the decisions about manufacturing and distribution and wants to pay Adi the price for the cost of the shoes and 10% fee.”

Who Owns Yeezy Sneakers?

Ye (center) pictured in the design studio with Yeezy employee Cesar Idrobo (right) Image via Netflix's Jeen-Yuhs

Looking through the USPTO, you can see just about every Yeezy model that has been released (with a handful of unreleased models mixed in as well) has a corresponding patent filing with the USPTO with adidas A.G. as the listed Owner. A closer look reveals that most were “invented” by Nic Galway, the Senior VP of Global Design at adidas, and/or Aurelian Longo, the current Designer Director of Footwear at adidas Y-3. Without knowing the full details of the contract between the two parties, based on these patents, it’s safe to assume that adidas has full ownership over models that have been released, especially considering that many utilize technology developed by the brand itself.

There is one exception, however, and that is the Yeezy Slide. Filed back in 2018 under Mascotte Holdings, Inc., the patent was granted in 2020 with Kanye himself being labeled as the inventor. If a move were to happen, the Yeezy Slide is likely a model Ye would be taking with him. Kanye is also listed as the inventor for a design patent for a pair of high heel shoes owned by Mascotte.

Financials Of The adidas Yeezy Deal

Ye at the launch of the adidas Yeezy Boost 350 Turtle Dove (2015; Image via adidas)

While we don’t know the precise numbers of the partnership’s early days, we do know the collaborative project generated upwards of $1.5 billion in revenue in 2020, with the previous year coming in at around $1.3 billion. For Kanye, his 15% royalty rate on wholesale for each sneaker sold has netted him roughly $150 million pre-tax annually. In fact, according to one of his recent Instagram posts, the Three Stripes offered to buy Ye out of his contract for $1 billion. Such an offer seems quite laughable considering Ye’s claim that his  “royalties next year are $500 million dollars alone.” If his touted number of Yeezy sneakers making up “68%” of adidas’ online sales, these numbers would add up, though there has been no concrete evidence to suggest either of these numbers are factual.

Contract Limitations

As reported by Bloomberg in 2020, the deal between West and adidas “...is more of a profit-sharing agreement than a typical licensing deal,” with The Three Stripes handling manufacturing and distribution and Kanye taking creative control and the direction of the label. Essentially, Kanye’s Mascotte Holdings, Inc. is licensing the name “Yeezy” to adidas to put on footwear designs that both parties agreed upon.

Alongside his adidas Yeezy releases, West was also running his “Yeezy Season” line that offered high-fashion styles in both footwear and apparel. In his infamous message regarding his distaste for Yeezy Day, Kanye said that “...my contract states I can do casual shoes.” (in regards to his recent deal with Gap). What defines a casual shoe? Well, in the Season lineup there was a wide range of boot options, women's dress shoes, and even slides, though the actual definition would be vague in legal terms. According to Ye, the adidas contract permits West to create casual footwear, fashion, amongst other things with the one exception being “performance footwear.”

What Legal Action Can Kanye Take Against adidas?

The duo signed an extension on their contract that extended the partnership until 2026, though Ye is currently claiming he has sent a breach letter that would allow him to leave in about 7 months (though he says he’s giving them until Tuesday, September 6th to make up for their transgressions). Zak Kurtz of Sneaker & Streetwear Legal Services (@SneakerLegal) weighed in on the situation…

“Based on the facts of Ye’s contract that we actually know about and from the patent and trademark filings by both adidas and Ye, Ye’s case against adidas for breach of contract based on adidas allegedly stealing his designs (like the Adifom Q). It is very likely that adidas owns the final design that were used in the design patent filings and all work product from sketches and renderings related to those final designs. If Ye’s contract extension did not include an option for him to terminate prior to 2026 he will have to rely on some other contractual provision.

Ye has a great legal team that can surely find some provision in the adidas contract and some supporting facts that could take the two sides into Court. In 2019 Ye sued EMI Publishing, hoping to terminate his contract with them because he claimed it was “lopsided and oppressive” for containing the famous clause that prohibited him from retiring. The two sides ultimately reached an undisclosed settlement where Ye reportedly was able to renegotiate his terms and royalty rates. The lawsuit didn’t look good for the record label but the two sides were able to come to an agreement and work together with them and Universal Music Group.”

To put it plainly, it sounds like there is a chance that Ye could get out of his adidas contract early or even renegotiate if adidas wants to continue to manufacture Yeezy's. That said, his breach claims are unlikely to win in court but could be the lever that helps him get what he wants.

Recap:

- Ye’s holding company, Mascotte Holdings, Inc., owns the trademarks to the Yeezy brand name

- adidas owns all things design patent related to adidas Yeezy footwear designs with the one exception being the adidas Yeezy Slide, which is owned by Ye

- Financially speaking, Ye is licensing the Yeezy trademark to adidas in a profit-sharing like model that earns him a 15% royalty rate on wholesale for each sneaker sold

- There is a chance Ye could get out of his contract with adidas early, but it will likely be dependent on his legal team finding a provision in the contract to support Ye’s claims or put enough legal and media attention on adidas that they agree to renegotiate

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