Kanye West's net worth has fallen, and he has lost his billionaire title.
Many more firms are breaking connections with him and prohibiting his products from being sold in their stores.
Is the rapper, who officially changed his name to Ye, going bankrupt as a result of his fall from grace?
Kanye West May Still Profit from Adidas Until Next Year
Adidas' decision to cut relations with the Grammy winner caused quite a commotion. This is because there is uncertainty about how their multibillion-dollar collaboration's intellectual property rights will be shared and whether there is a way to avoid a judicial battle.
According to Fortune, the "Donda" rapper's firm Mascotte Holding Inc. has more than 160 trademark applications and registrations for his Yeezy brand.
However, Adidas owns the designs for the majority of Yeezy sneakers, including his iconic Yeezy Boost 350.
The article added that the gap in intellectual property rights would have an impact on the split, albeit it was unclear how. The answer will be based on the specifics of the rapper's deal with Adidas, which he signed in 2016.
This material, unfortunately, has not been made available.
According to trademark expert Josh Gerben, Kanye's contract may potentially include termination terms that allow one party to seize the IP (intellectual property) from the other or a "morality" clause that allows for early termination of the transaction.
He stated that because no one understands what's written between the two parties' contracts, it's uncertain how smooth or unpleasant this divorce would be.
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Another lawyer, David Martinez, said that the severed partnership might still be litigated or arbitrated, but "branding agreements often include a comprehensive dispute resolution system."
Since 2017, Adidas has claimed ownership of all previous items, including the Yeezy Boost sneakers.
However, if Adidas and Kanye retain control of their intellectual property, Kanye may sell Yeezy items himself, according to lawyer Zach Kurts.
"If he really wanted to, he could probably sell other clothes or maybe footwear," the expert said. "But when I say 'other,' it would have to be all-new silhouettes and everything with his trademarks."
Adidas has stated that it will cease manufacture of all Yeezy-branded items and immediately cease all payments to Kanye West, but the breakup of their collaboration will likely be costly.
They predict a $247 million impact to net earnings this year after severing connections with Ye, and external estimates show that the collaboration accounts for 7% of Adidas' revenues.
"At the absolute least, Adidas would owe Ye royalties on everything sold since the last royalty payment they made him," says lawyer Heidi Howard. "Because of the long tail for shipping and sales, as well as money collection, this process may extend beyond 2023."
Through 2020, Yeezy will have made more than $500 million in royalties and marketing fees. Kanye's contract with the business provided him with 15% royalty on wholesale items, although it was believed that he attempted to obtain a 20% lifetime deal.
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