ANNICK RUNYON—After a string of antisemitic remarks, numerous companies cut ties with the artist Ye, formerly known as Kanye West. Some of the companies include Gap, JPMorgan Chase, Balenciaga, Creative Artists Agency, and MRC Entertainment. However, the sportwear company most strongly associated with Ye and his brand remained silent. The rapper proclaimed, “I can say antisemitic things and Adidas can’t drop me.” And in response, Adidas dropped him. Now, with the end of this multi-million dollar deal, it calls into question the intellectual property ownership of the “Yeezy” brand.
On October 25, 2022, Adidas officially terminated its partnership with Ye and posted a press release on its website with the following statement: “adidas is the sole owner of all design rights to existing products as well as previous and new colorways under the partnership.” The public does not have access to the original contract. However, this statement provides insight into its terms and may even act as a warning sign to Ye regarding ownership of Yeezy shoe designs. Typically in the sneaker market, there is an array of intellectual property involved, such as design patents, trademarks, and even trade dress. In this deal with Adidas, Ye owns over 160 trademarks with the mark “Yeezy” and the logos associated with the brand. That pales in comparison to Adidas who owns most, if not all, of the products’ design patents. While Ye still has the ability to place his trademark on other shoe designs, Adidas has the right to release archived shoes or designs with new colorways without Yeezy branding.
Yet, this might not be a clean break for Adidas from Ye. There is likely a moral clause in the agreement that may produce several breach-of-contract ramifications. This type of provision typically prevents collaborating parties from engaging in conduct that would cast “public disrepute, scandal, or embarrassment” on the other party. The clause is industry practice in Hollywood and would allow Adidas to terminate the contract based on Ye’s adverse actions. However, the type of language used in moral clauses is “notoriously ambiguous,” so it may be difficult for Adidas to enforce. Additionally, Adidas runs the risk of trademark infringement liability based on customers reactions to new shoe products, even though the company owns the design patents. Consequently, we can expect a stream of new lawsuits coming soon.
Ultimately, due to Ye’s actions, Adidas faced a difficult decision of whether to preserve its reputation or profitability—it may have saved both. Overall, Adidas estimates that this split will cost over 250 million euros. Nevertheless, it is possible for Adidas to continue selling the sneakers under its own branding, which would save the company around $300 million in royalty payments to Ye. Thus, Adidas’s financial loss may be short-term. Conversely, Ye not only immediately lost his billionaire status, but also his image. In sum, Jonathan Greenblatt, the chief executive of the Anti-Defamation League, says it best: “Adidas’ action sends a powerful message that antisemitism and bigotry have no place in society.” This situation reiterates the notion that freedom of speech does not mean freedom of consequence.
