What started as a match made in heaven, adidas and Ye's (formerly known as Kanye West) relationship has been put to the test over the years with the partnership ending in October 2022.
Prior to this split, threats were made by Ye to disembark from the German sportswear giant, claiming adidas had breached their contract by stealing his designs and taking unprecedented creative liberties with the Yeezy brand. He even went 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.
Based on these 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.
Images via kanyewest
Who Owns The Yeezy Brand Name?
In the iconic 2019 Forbes interview in which Kanye shared hundreds of Yeezy design samples, the magazine reported that “West still owns 100% of Yeezy.” What is likely being referred 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” 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 a now-deleted Instagram post, 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?
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 of a design patent for a pair of high heel shoes owned by Mascotte.
Financials Of The adidas Yeezy Deal
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 reported figure that “68%” of adidas’ online sales came from Yeezy, these numbers would add up, though there has been no concrete evidence to suggest either of these numbers is 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 “my contract states I can do casual shoes.” (in regard 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, and fashion, amongst other things with the one exception being “performance footwear.”
What Legal Action Can Kanye Take Against adidas?
The duo originally signed an extension on their contract that extended the partnership until 2026, though adidas terminated the partnership in October 2022. Zak Kurtz of Sneaker & Streetwear Legal Services (@SneakerLegal) weighed in on the situation in regards to what Ye could have done legally against adidas when the two were still partners.
“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.
The Current State of Yeezy Sneakers with adidas
Following the termination of the partnership between Ye and adidas in October 2022, The Three Stripes was left with over $1 billion worth of Yeezy sneakers. Plans were put forth to possibly write off the inventory, destroy it, donate it, or sell it. Months went by before the brand decided to sell Yeezy sneakers in May 2023. This first launch was so successful that it accounted for 85% of adidas' Q2 2023 operating profits. A second launch took place in August with retailers now taking place in Yeezy releases, not just through adidas' direct-to-consumer channels.
A third release was planned for November 2023, however, adidas canceled these plans due to the ongoing conflict in the Middle East and later stated that they were contemplating writing off an estimated $320 million worth of Yeezy shoes. Less than one month ago, The Three Stripes came to a decision and announced they would sell its remaining Yeezy inventory in 2024 with the brand officially kicking things off with the adidas Yeezy Boost 350 V2 Steel Grey. Alongside this 350, there are numerous pairs planned to be released in the coming weeks.
Word of this reached Ye and he took to Instagram to rant about adidas selling "fake Yeezys" and alleged that the German sportswear giant is suing him for $250 million. On top of this, he stated that he was not being paid for the shoes they had been putting out. However, when adidas originally announced it would begin to sell Yeezy sneakers once more, the brand stated that Ye was still being paid his 15% royalty rate on all of the products sold.
It's likely that once all of the remaining Yeezy sneakers are sold, adidas will no longer sell the designs in any capacity as CEO Bjørn Gulden stated in August 2022 "The Yeezy product is something that he created, he’s the inventor of it and we have been his partner. To take his designs and sell them off later, which we technically legally could do, is not part of our strategy. Our task now is to limit the damage, get rid of the inventory, use the proceeds to good … and build a business later without Yeezy.”
To stay updated on the current state of Yeezy sneakers, including upcoming releases and more, download the Sole Retriever mobile app.
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 licensed the Yeezy trademark to adidas in a profit-sharing-model that earned him a 15% royalty rate on wholesale for each sneaker sold
- adidas is selling Yeezy sneakers with the brand stating that Ye is being paid 15% royalties on pairs. However, Ye alleges that he has not been paid and is being sued for $250 million
