Kanye West’s net worth has dropped, and he no longer holds the title of a billionaire.
Many companies are cutting ties with him and refusing to sell his products in their stores.
Is the rapper, who changed his name to Ye, bankrupt due to his fall from grace?
Adidas’ decision to sever ties with the Grammy winner created quite a stir. This is due to uncertainty about how their multibillion-dollar collaboration’s intellectual property rights will be shared and whether a judicial battle can be avoided.
According to Fortune, Mascotte Holding Inc., the rapper’s company, has more than 160 trademark applications and registrations for his Yeezy brand.
Most Yeezy sneakers, including his iconic Yeezy Boost 350, are designed by Adidas.
The article said that the disparity in intellectual property rights would affect the split, but it wasn’t clear how. The answer will be based on the rapper’s 2016 contract with Adidas.
Unfortunately, this material has not been made available.
According to trademark expert Josh Gerben, Kanye’s contract could include termination clauses that allow one party to seize the other’s intellectual property (IP) or a “morality” clause that allows for early termination of the transaction.
He stated that because no one understands what is written in the contracts of the two parties, it is unknown how smooth or unpleasant this divorce will be.
Another lawyer, David Martinez, stated that the broken partnership could still be litigated or arbitrated over, but “branding agreements frequently include a comprehensive dispute resolution system.”
Adidas has claimed ownership of all previous items, including the Yeezy Boost sneakers, since 2017.
According to lawyer Zach Kurts, if Adidas and Kanye retain control of their intellectual property, Kanye may sell Yeezy items himself.
The expert said:
“If he really wanted to, he could probably sell other clothes or maybe footwear. But when I say ‘other,’ it would have to be all-new silhouettes and everything with his trademarks.”
Adidas has stated that it will stop producing all Yeezy-branded items and immediately stop paying Kanye West, but the breakup of their collaboration will most likely be costly.
They estimate that severing ties with Ye will cost them $247 million in net earnings this year, and external estimates show that the collaboration accounts for 7% of Adidas’ revenues.
Lawyer Heidi Howard says:
“At the absolute least, Adidas would owe Ye royalties on everything sold since the last royalty payment they made him. Because of the long tail for shipping and sales, as well as money collection, this process may extend beyond 2023.”
Yeezy will have earned more than $500 million in royalties and marketing fees by 2020. Kanye’s contract with the company stated that he would receive a 15% royalty on wholesale items, though he believed he attempted to negotiate a 20% lifetime deal.