As music star and designer Kanye “Ye” West’s business empire and reputation go further into free fall — after his Paris Fashion Week appearance wearing a “White Lives Matter” shirt followed by a string of antisemitic comments in interviews and on social media platforms — what remains to be seen is how his up-till-now highly lucrative deals with Adidas and Gap will ultimately disentangle.
During the last few weeks, West’s empire of business relationships across fashion, finance, music and media industries has crumbled with not only Adidas and Gap but also Balenciaga, CAA, UMG/Def Jam, Vogue and JP Morgan Chase all severing ties with the artist.
But the Adidas and Gap deals may be the hardest to unwind given complicated questions surrounding IP ownership and whether a morals clause exists in the contracts, which are private.
In an Oct. 25 statement ending their seven-year partnership with West, Adidas, which said it will take up to a $247 million short-term loss from ending the sale of Yeezy sneakers, claimed that it is “sole owner of all design rights to existing products as well as previous and new colorways under the partnership.”
But while Adidas can claim it owns West’s designs for Yeezy, likewise the star owns the trademark to the Yeezy name. So in theory, Adidas could move forward by producing Yeezy-like products without calling them Yeezy items, and West can continue using the Yeezy name independently to brand similar, or markedly different, products. Similar considerations apply to the Yeezy Gap line, which the retailer is no longer selling and is a partnership that West previously said he wanted to dissolve.
“Typically, there’s different types of deals when a big brand works with a celebrity. And depending on the stature of the celebrity, they’ll have different amounts of leverage,” Ellie Heisler, entertainment and intellectual property lawyer at Nixon Peabody LLC, who has not seen the deal and is commenting based on what’s been shared publicly, tells The Hollywood Reporter. “When Kanye started with Adidas, he was very clear from day one that Yeezy was an extension of him. And so that trademark is owned by him; it’s not owned by Adidas. So with parting ways, unless there’s certain restrictions or contractual obligations in the contract that limit his right to use the trademark, he can move on from Adidas and use the Yeezy trademark however he wants, because he’s the owner of it.”
As far as the designs go, there’s very little that’s legally protectable, which is why lawsuits over copycat designs often end up heavily litigated in court. And the question of intellectual property is complicated by the fact that West’s designs were developed in collaboration with Adidas during the process of building the Yeezy brand, so unless stated otherwise, Adidas as financier would own the materials they created in service of the brand, including photo shoots, marketing materials, look books and colorways.
Ultimately, there are various ways to end a contract term; in this instance, Adidas finally walked away after West publicly challenged Adidas executives. “The thing about it being Adidas — I can say antisemitic things and Adidas can’t drop me,” West said during a Drink Champs podcast. He had previously said he wanted to end his partnership with the sneaker company in the name of creative freedom.
According to Heisler, a contract “can be terminated for breach by either party, so if Adidas didn’t pay what they owed to Kanye, he could then put them on notice of breach. Typically, either party has an opportunity to cure that breach, and if they don’t cure it within a certain period of time, the non-breaching party can move forward to try to terminate.”
However, in celebrity-based agreements, there is almost always a morals clause as well, which West theoretically could be in breach of.
“In the morals clause, it allows the brand to terminate the agreement if the artist or celebrity is in breach of the morals provision, and the morals provision will often say [this can happen] if you commit a crime or you do something that shocks or offends the public,” Heisler says. “These morals clause provisions are heavily negotiated. And a lot of times these days actually, the celebrity has some leverage in requiring a mutual provision. If a key executive at the brand, for example, commits a crime, they have a way out of the deal too, because a celebrity has to protect their reputation as well.”
The Yeezy Adidas line was highly profitable, with the star’s products reportedly generating $2 billion in annual sales for Adidas. And according to West on his Instagram, his net worth dropped from $2 billion to $400 million in a single day following the termination of his partnership with the German sportswear giant, which said it was stopping all payments to the star and his companies.
Whether West would be able to find success with his own Yeezy brand going forward is another matter, though it does appear to be on his mind. On Oct. 26, West marked his return to Instagram, after a temporary suspension, by sharing a screenshot of a text message conversation with an adviser discussing his Adidas and Gap deals.
“As to adidas, you can start to make new designs for footwear, apparel and accessories immediately. As to Gap, the non-compete expires December, 15 2022,” the text from his adviser read, adding: “You own the Yeezy name and all trademarks associated with Yeezy.”
However, one crisis manager tells THR that he believes West may one day be able to repair his celebrity brand.
“He’s backed himself into a tight spot, obviously. But then again, if you know him and you’re following him, he doesn’t really care. He believes that being rambunctious like this has helped his career and has made him the firebrand that he is, but I think he overstepped bounds this time,” Juda Engelmayer, a publicist who focuses on crisis management and has represented the likes of Harvey Weinstein and Anna Delvey, tells THR. “It’s ego-driven. It’s feeling like you’re too big to fail.”
“Did Kanye already go too far?” continues Engelmayer. “He might have, but I don’t think he’s past recovery. America is still a very, very forgiving place. We like underdogs, and we like people who will make us feel good by admitting their mistakes and saying they’re going to rebuild. But he has to take a bunch of steps first; if he apologizes right now, it looks like he’s just doing it because of money.”
Seemingly, West does not currently have the counsel of a publicist. Many celebrities fail to hire one that specializes in crisis management before the crisis manifests.
Meanwhile, the number of brands and companies who say they will not work with West continues to cascade. In recent days, TJ Maxx, the RealReal, Skechers, Peloton, Foot Locker and Christie’s have all joined the list of corporations to have publicly distanced themselves from West.
“We are not selling any of this material nor do we have any plans to,” a Christie’s spokesperson said in a statement to THR.
Peloton announced that they have “indefinitely paused the use of Kanye West’s music” on the platform, adding: “This means our instructors are no longer using his music in any newly produced classes and we are not suggesting any class that includes his music in our proactive recommendations to Members.” And a spokesperson for Foot Locker said in a statement: “We will not be supporting any future Yeezy product drops, and we have instructed our retail operators to pull any existing product from our shelves and digital sites.”
And Bottom Bunk Sneaker House, a shoe resale store on Melrose Avenue designed to provide reentry services to formerly incarcerated men and women, is also stopping sales of Yeezy shoes.
Bottom Bunk founder Cole Richman tells THR via email that Yeezy products have historically sold well, making this “a major financial hit for Adidas, just as it is for Bottom Bunk.”
“Making the decision to remove them from our inventory wasn’t an easy choice as YZY [Yeezy] products equate to about 30 percent of our business, but staying true to our values is paramount,” Richman says. “[Adidas] will survive with their current lines and collaborations and find new ones but it will be extremely difficult to replicate what they had with YZY.”
Richman began his own career on the sneaker resell market by purchasing a pair of Yeezys and selling them for a profit, noting that Yeezy slides (which retail at $70 and can resell for as much as $300) are the best-selling product from the line, and that other sneaker silhouettes retail from $150-$250 and can go for as much as $2,000 on the resell market.
“Yeezy’s will continue to resell for a while and be a coveted shoe for collectors but for everyday use, consumers will move on to something else,” Richman says. “When you’re talking about hype sneakers, YZY footwear is really the only offering from Adidas and is absolutely its most popular shoe in that category.”
As for next steps for West — the self-proclaimed “most impactful artist of our generation,” who has compared himself to Warhol, Shakespeare, Disney and others — Engelmayer predicts West will find it very hard to get new partners going forward.
“Even if he has fans who love him, even if he writes a new song, who’s going to put the label on it? Who’s going to sell it? I don’t think that’s hit him yet,” Engelmayer says. “The best thing he can do right now is shut his mouth, walk away, close down and just stay in obscurity for two months. And then start rebuilding slowly. America is a very good place with media. If you shut yourself down, no one covers you. You’re only news when you’re in the news. As long as he keeps his mouth shut, he becomes yesterday’s news.”