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27 October 2022TrademarksMuireann Bolger

Q&A: Kazuyo Morita on Kanye West’s defunct Adidas deal

This week Adidas ended its nearly decade-long parnership with the controversial rapper Kanye West, also known as Ye, after he issued a spate of antisemitic and comments.

The move came yesterday, after West boasted that Adidas would never drop him due to the highly lucrative nature of his partnership with the brand centring on the ‘Yeezy’ range of sneakers.

But the German sportswear brand followed the lead of retailers such as Gap and Balenciaga in the wake of West’s antisemitic outbursts.

These included a screenshot on Instagram of a text conversation with fellow rapper Sean ‘Diddy’ Combs, in which West accused Diddy of being controlled by the Jewish people, and West’s avowal that he would go “death con 3 on Jewish people”.

West also stoked controversy earlier this month when he wore a ‘White Lives Matter’ T-shirt, affronting civil rights activists who had embraced the phrase ‘Black Lives Matter’ after the murder of George Floyd by a police officer in 2020.

The termination of the deal is expected to have a short-term negative impact of up to $250 million on the company’s net income in 2022, given the high seasonality of the fourth trading quarter of the year, the company said.

As the fallout continues, Kazuyo Morita, trademark partner at Holland & Hart, explores the IP implications of West’s terminated partnership with Adidas, and what can be learnt.

What is the background with regards to Kanye West’s fallen partnership with Adidas?

This was a high-risk, high-reward partnership between a sportswear giant, Adidas, and a musical savant, Kanye West. The partnership was massively successful while it lasted, generating between $1 billion and $2 billion in annual sales.

But, yesterday, Adidas terminated the deal (and not soon enough) after West espoused antisemitic sentiments on various social media channels and in interviews.

What are the IP implications?

The IP fallout from this brand breakup will depend on the details of the contract. If carefully drafted, there should be few surprises when it comes to who owns what. Think of a well-drafted prenup—going through the divorce still hurts, but the roadmap is clear.

While the contract is not public, media statements seem to suggest that each party owns its trademarks, which is typical, and Adidas owns the shoe designs and colourways.

There’s been little discussion on who might own the trade dress rights to the extent any exist, but it is likely owned by Adidas.

What is the significance of this development?

I bet every lawyer who drafts these contracts on a regular basis is sweating a little and reviewing their form agreements (and recent agreements) to make sure they are complete, and finding ways to anticipate this type of breakup in their agreements.

Partnerships often end because of missed performance goals or quality control issues, but less often due to inappropriate tirades.

And, many companies recently tempted by high-profile collaborations may be getting cold feet or doubling down on their due diligence efforts before saying “yes”.

What is at stake?

Brands are at stake—a company’s reputation can be tarnished by association and must be rebuilt genuinely and thoughtfully. This is especially true in light of the ‘cancel culture’ movement, which has seen the ostracisation of many celebrity brands following some ill-advised comments or actions.

Money is also at stake—failed deals are expensive for all parties involved.

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