Who Gets What in Adidas-Kanye Breakup

wake of his barrage of anti Semitic remarks. The breakup of the almost decade long collaboration will cost Adidas a nearly two d fifty million dollar hit to its earnings this year, but it will cost Yea even more, reportedly one and a half billion dollars and his status as a billionaire. It's also created a morass of intellectual property rights from their multibillion dollar collaboration. My guest is attorney Zach Kurtz, who founded the law firm Sneakers and Streetwear

Legal Services Zach So. About two weeks ago, Yea said that Adidas can't drop him. Do you think there's something in his contract that he thought would protect him. I mean, I think that's just Kanye being Kanye, thinking that he was invincible. I think it was almost the opposite that there was something in the contract that a statement like that could hurt him. Whether it's morals non disparagement. But I think it was also a challenge to Adidas when

he said that, as well as his additional comments. We don't see the contracts, so we don't know the specific language, but I'm pretty sure there's a morals clause in it, and and I'm sure you just had the right to do that based on the situation here. When we're talking about sneakers, are we talking about patents or trademarks? All types of intellectual property, and a lot of people interchange all three

of them, whether it's patents, trademarks, copyright. But usually what happens is you have a sneaker design and design will typically have a design patent and you could get several design patents for it. And as you know, the companies will also have their trademarks, whether it's a Smooze or Adidas sign, and they'll put those on the shoes as well. So and when she was a combination of design, patent, trademarks.

Some companies even have trade dress. When the design patents expire or at the same time, they'll get different aspects or features of the shoe to be trademarked. So it's really a combination of all the above. And in the contract, the IP ownership and licensing and transferring and how the IP will be used and shared is fuss In the contract. Adida said in the statement that it is the sole owner of all design rights to existing products as well

as previous and new color ways under the partnership. Is this firing a warning shot at Kanye because he's claimed that Adida stole his designs and took creative liberties with his brand. Yeah, I think you had the nail on the head of it there. I think that's exactly what sort of a warning sign letting us know a little bit of the contract terms that it probably says that Adidas is going to own all those designs, Kanye will not get them upon termination, and that any new iteration

will be controlled by Adida. I think it was a warning sign to the public. It was also the Kanye saying, you know, get out of here. Who don't think you're going to take your designs with you. Kanye has the trademarks for yeasy wi z e y yees Us, among others. His company has more than a hundred and sixty trademark applications and registrations for his easy brand. So Kanye has

the trademarks in this deal. What does Adidas have? So Kanye owned his I P that he brought to the table, which is, as you stated, easy and y z Y and all the logos and trademarks associated with his brand in this deal, all the new designs for the Adidas shoes, the three fifties, the seven fifties, literally almost every shoe that Adidas has made with Kanye, the design patents for

those appear to be owned by Adidas. What we see from the facts and everything on the table, with the design patents and the trademarks and such, it looks like Adidas owns almost all of the designs of the shoes and Kanye owns and was licensing his y z Y and Easy brand to be put on those shoes. So just to get to the you know, the basics here, people who think they are buying a sneaker designed by Kanye West or yea, they're buying a sneaker designed by

someone else. Yeah, I mean technically putting it. Kanye definitely has his damp on it. And then that's sort of one of his arguments and why he wanted to leave Addis and a lot of the companies because control Ultimately kanyell work with the designers and the contract will talk about how much control he had, how much approval he has when he can do this, when he can say that, but ultimately it's it's gas or you know, the companies who make a lot of the major decisions. What does

Kande have the right to do owning the trademarks? When this deals terminate, he's going to have the ability to use his own trademarks what he owns on other shoes. Depending on the contract, it might have a wind down period, might have some restrictions in it that say for X amount of time you can't enter this sneaker market or

you know, running shoes or shoes something like that. But I think upon termination like we have now, it's up to Kanye to take his trademarks with him and to have new designs or use his trademarks for other purposes. Is on clothing, and he does own several other design patents. One was for the easy Slide, and I think to me that's the most interesting one because although his name is on the design patent as an owner and the inventor,

it's still associated with Adidas. When everyone thinks of the slide, which is one of the top selling Easy shoes. Adidas Easy Shoes they associated with Easy Adidas Kanye Easy Slide. So I think that if Kanye wants to bring it with him, or if Adidas wants to use that same side, you know, without the branding, there'll be a good legal argument, or it'll be tricky to say, hey, there's that there's not confusion, or that consumers don't associate whatever that is

with Kanye or with Adidas. So he also owns a high heeled shoe, and I would usually say he'd be able to take those with him and use it, But I'm not sure about the Easy Slide. I think if he couldestingly makes some arguments. So essentially as Kanye just working with new designers and creating his new designs and new sneakers, brand new. So now as far as Adidas they on these signs, can they just put out the same shoes without the Easy trademarks. There's been talking about that,

you know, and that has happened before. Other companies have done such a thing. You know, it's an athlete leaves or the contract expires, they'll take off his branding and his trademarks, and people have in the sneaker community. Some

don't like that when that occurs. And I think in this situation, if Adidas to drift the easy branding and started selling easy, there'll be a lot of outrage just that Adidas for doing that after they terminated with Kanye, But I think there would be all sneaker heads and seas in the community who purposely wouldn't buy the shoes for that reason. At the same time, there probably would be the opposite, though. The sneaker world is crazy, to

be honest. Sketcher said that Ye showed up unannounced and uninvited at its corporate headquarters in Los Angeles on Wednesday for what reason they didn't say. So if he wants to make his own sneakers, that's not going to be

so easy, is it. It's a lot harder than it look, you know, And only a couple of companies have the ability to do what Adidas is doing, you know, to produce sneakers at such back turn around times at the same time that amount of stocks, the three fifty, they had made so many of those, and it's very rare

that companies could manufacture the amount that Kanye want. I think that was a big part of the deal to Kanye when he was shopping and trying to get out of Adidas before this all occurred, and he was reaching out to other companies and he just couldn't find another companies. But it sounded like to actually do this, and that's just a big thing. If you want to do something by yourself, like Kanye wants to do, he's gonna have a hard time finding a manufacturer, especially now after everything

has gone down. Do these celebrity endorsements or celebrity co branding do they bring the sales to these sneakers? I mean, can Adidas just put out the same kind of sneaker but it won't get as many sales because it doesn't have that celebrity factor. Yeah, definitely. I think what we see in the sea industry is is exactly that celebrities influenced.

There's collaborations. They've been going through the roof lately, and because of the collaborators, these companies are able to sell out shoes quicker and Nike's insect will tell out no matter what, to be honest, but when you add the Travis Scott to it, it's just turned the fact that the wow factor and the price of penfold. So I think you're right. That's why all these companies are reaching out the celebrities and doing collaboration shoes because people want

to see that now. They don't just want to regular you know too, or a different color way. They want someone that they know and someone they connects with. So there's an artist and entertainer, someone they like on that shoe. And when the companies do that, it definitely helps their bottom line. So do they have to be careful though? Because the celebrity has pinash is one thing, but a lot of celebrities like Kanye come with, you know, different problems,

so there is this explosive element added. You're exactly right. I think that's the most important thing that we should take out of the situation. Influencers are great and they could help your bottom line with sales, and you know they could. If you pick the right one, you can make a company, you know, explode and do great, especially for these small startups. But picking the right one and

doing your due diligence is super important. I remember reading something recently where they said in two was the first time that the stock market when they're analyzing companies for their I p O that they had the risk of influencers listed, and I think that says a lot that

influencers in society now have. You know, they're they're good, but they're also so risky that people must analyze that in every aspect of you know, a company, and I think these brands should be doing that for sure every single time with the contract your firm does sneaker and streetwear legal services, how much litigation is there or legal work is associated with sneakers and shoes. It's a lot,

it's a lot. It's just enough that I could have my own practice strictly doing sneakers in streetwear and I love it, and it's more just than just litigation. But we're touching on a lot of the main areas that are covered in here, sneaker design and contracts, and it's a lot of I P. You know, it's heavy i P and heavy contracts and it's really fun. But you get in these situations with influencers or you know, designers and shoes and such, and there tends to be litigations.

So it's been taken off a lot. As you see in the past four years has been a lot of litigation relating to UH independent designers and trademark. So how many sneakers do you own? A? Probably? But I'm like that, how about you? No, No, I don't own any sneakers, And you can tell I don't have much knowledge of this area of designers sneakers, but maybe after this I'll start. Thanks so much, Zack that Zack Orts, founder of the law firm Sneakers and Streetwear Legal Services. Next Tuesday, New

York City's wage transparency law goes into effect. It will make it mandatory for employers to share the salary or hourly wage and postings joining me is and Dana, a partner at King and Spalding, tell us about New York City's new law. So I think it's important in understanding the New York City pay transparency law to place it into the broader US context of pay disclosure laws that

are getting past right now. In the past few years, we've seen a real proliferation of these types of laws, and that trend is expected to continue, and I think it's important to understand that context in order to see how New York City is kind of at the forefront

of some of the changes in these laws. So one of the key differences that we've really been seeing in the passage of these laws is that originally the laws were really focused on being reactive, and they were only requiring pay disclosure when somebody asked for salary information, whether it was an applicant or when they were given a

conditional offer. And now what we're seeing is a shift in the laws, and the laws are becoming more proactive, with states and cities amending these pay disclosure laws requiring employers to provide proactively salary ranges upfront with posting of job advertisements. And that's exactly what the New York City

law is doing. So all in employers in New York City are going to be required to include the minimum and the maximum annual salary or hourly wage in any advertisement for a job or an advertisement for a promotion or transfer opportunity internally at the company, and that range may be extended from the lowest to the highest salary or wage the employer in good faith believes at the time of the posting it would pay for the advertised job,

promotion or transfer opportunity. And this is going to be a big change for a lot of employers who haven't necessarily been disclosing that information publicly. Why don't employers want to disclose that information? Because as a job seeker, you look at an AD and should I apply for this ad? Well? How much does it pay? A lot of times that

must stop people from applying for the job. Well, I think there's a variety of reasons that businesses may not want to actively disclose in a job posting what they're willing to pay. So, but that might be they don't want their competitors to know what they're willing to pay. Part of it, maybe you know that they want to be able to look at the candidates and assess, you know, I'd be willing to pay more for candidate A who has fifteen years of experience versus candidate B, who maybe

only has two years of experience. Is setting that range upfront in a job posting may not be the place where they want to originally open that discussion. However, they're not going to have an option anymore. When it comes to New York City and other similar jurisdictions, does law apply to all employers whoever puts out a job application?

Or are there limits? So it's going to apply to all employers with four or more employees as long as there's at least one employee in New York City, and it's going to apply to all positions that can or will be performed at least in part in New York City. So that is going to be a little bit complicated

for some employers to figure out, particularly for multi jurisdictional employers. Obviously, with the COVID pandemic, we've seen the rise of remote workers, whether that is kind of a fully remote position versus a partially remote position where a worker maybe in New York City two days a week, but in Connecticut three days a week. In that situation, the New York City

law would apply to that job posting. For large, multi jurisdictional employers who are possibly looking for employees in any state um to fill a job position that's fully remote, they're going to need to look at New York City's law as well. I take it the point of this is not just to make life easier for job seekers, that there is also a hope that it will promote pay equity. Yes, I think proponents of pay disclosure laws do argue that these types of laws will help close

the wage gap for women and minorities. You know, while it remains to be seen if this becomes a reality as these laws get past, I think there's no doubt that these laws provide more pay information to applicants and to employees, and I think that we do anticipate that we're going to see that impact in the workplace, particularly, you know, I think some commentators are predicting that companies are going to be able to see what salary ranges

their competitors are offering and therefore kind of match what competitors are paying, which could actually alter some of the recruiting methods that are going on right now. I think other people are also anticipating that this may give rise to more pay equity litigation. So explain what kind of

pay equity litigation you're talking about. So one of the recommendations we are making two employers is to carefully take a look and assess whether or not they need to do an internal pay equity audit and look at how

their salary ranges are being paid for current employees. So obviously, once you're posting job salary ranges for a position that is being advertised, current employees are going to be able to look at that job posting and determine whether or not they are currently making an amount within that salary range, and as more employees are having access to information about pay ranges, some commentators do expect that workers will become

more disgruntled and may start asking more difficult questions about why they're making less money than somebody else of a different gender or a different race, giving rise to more pay equity litigation. I suppose that answers my earlier question about why employers wouldn't necessarily want these kinds of laws. Have you found more companies focusing, you know, without being pushed by outside agencies, focusing on E s G? Definitely.

I think more companies are becoming focused on E s G as more customers, consumers employees are asking questions related to their E s G. So tell me that the penalties associated with these laws. So this is one of the key differences in how different states and jurisdictions are looking at what the penalties will be for favor to

comply with these types of laws. Here in New York City, the Commission on Human Rights is entitled to investigate complaints by employees or applicants, and the Commission can actually issue penalties. So the Commission came out with guidance that effectively said that there will be no money for the first violation if an employer can cure the violation within thirty days of service of the complaints. Um, however, you know second penalty.

You know a second violation, the Commission can end up issuing a penalty of up to two dollars, and it really remains to be seen what these penalties will look like for a second or third violation. Also important is to understand that there's a private rate of action under the New York City law, but it's limited to current employees who are bringing a claim against their current employer.

Applicants for a new position who are not employed by the employer do not have a private right of action, so they can't bring civil litigation against the employer in court. Will this be a heavy lift, you know, complying with these laws? Would it be a heavy lift for big employers? Will they all be calling their attorneys to ask what to do? I think it really depends how much thought

employers have put into what they're paying their employees. For those employers who have seen this legislation coming, a lot of them have been preparing and thinking through how to make these pay disclosures. Once the laws are in place. For other employers who are caught a little bit flat footed, they may not be as prepaired and they may be scrambling come November one. You said earlier that you see this as a trend that's going to spread, these pay

transparent see laws. Do you think it depends on how well they work out in the states where they are currently on the books, or that it's just a trend that's going to continue no matter what. I think it's a trend that's going to continue no matter what. I think that there's a real hunger right now from employees for access to more information about pay, and I think that there's a trend with employers really looking to ensure they have employee trust and pay disclosure is one of

the ways to do that. I also think that, you know, how these laws work out, it will take a while for any sort of real data to come out, and so I think in the meantime, we're going to see a continuation of these laws being passed. Well, thanks so much. Ann. That's and Dana a partner at King and Spalding. And that's it for this edition of The Bloomberg Law Show. Remember you can always get the latest legal news on

our Bloomberg Law Podcast. You can find them on Apple Podcasts, Spotify, and at www Dot Blue Bomberg dot com, slash podcast slash Law, and remember to tune into The Bloomberg Law Show every week night at ten pm Wall Street Time. I'm June Grosso and you're listening to Bloomberg