Briefing: August 4, 2023

Adidas x Yeezy, EU Competition Probe & Rise and Shine v. Pepsi

Adidas gave some notable updates on its efforts to deal with a reported $1.2B in unsold stock of Yeezy products this week. In a Q2 earnings call on Thursday, CEO Bjorn Gulden “quickly” touched on the topic of Yeezy, telling analysis that adidas had “a very successful first drop” of Yeezy branded products, as it sold “around $400M in Q2, which is basically the same as we did a year ago.” Gulden noted that “the whole launch worked very well” & further said that adidas was, as of Thurs., in the midst of a second drop of Yeezy products, with “smaller drops” in the works for the future.

Ultimately, no shortage of the discussion & analysts’s questions revolved around the effects of the since-terminated deal, with the word “Yeezy” coming up more than 50 times during the Q2 call.

Some Background: The largescale sell-off follows from adidas’ move to end its long-running partnership with Ye (formerly Kanye West) after he made a string of antisemitic and other offensive comments in Oct. 2022. The termination has left adidas in a difficult position operationally, reputationally & financially, as it had a significant inventory of Yeezy-branded wares on hand given that the existing deal was not slated to expire until 2026. “We inherited quite some inventory, and we were choosing between destroying and writing off the inventory against selling and doing something good with inventory,” Gulden said in the Q2 call.

“I think we landed on something that has worked,” Gulden said on Thurs. “We spent a lot of time talking to the different organizations and felt that we had support to do it. We have accrued or paid $110M in donations, and now we are at the phase of launching the second drop. And of course, there’s uncertainty. We never know what will happen. So that’s why we are very, very careful.”

The IP Overview: In connection with its partnership with Ye, adidas was in charge of design & manufacturing of the products, and seemingly gained ownership of the designs as part of the deal. (It’s worth noting that Ye, not adidas, maintains rights in the “Yeezy” trademark). The company stated last year that it is the “sole owner of all design rights to existing products” under the partnership & various TM, copyright, and patent registrations confirm that.

*This ended up being a bit of a deep dive. For the sake of space in this email, you can find the full piece, including a snapshot of adidas’ current Yeezy-centric legal matters, right here.

Some Litigation Updates

– Rise Brewing v. PepsiCo: An SDNY judge has tossed out the TM lawsuit that Rise Brewing filed against PepsiCo. for allegedly using the confusingly similar “Mtn Dew Rise” name for an energy drink. More to come on this reverse confusion case soon.

– Hermès v. Rothschild: MetaBirkins maker Mason Rothschild filed a declaration with the court this week, confirming that he has complied with the permanent injunction order to the best of his abilities.

– Chosen Figure v. Hadid: Model Bella Hadid was hit with a new copyright infringement lawsuit for posting a paparazzi photo of herself to her Instagram back in 2020; our (dwindling) tracker of these cases, which are not being filed with the same frequency as in the past, can be found here.

– A couple Chanel jewelry cases: Chanel has filed a couple of jewelry-centric trademark cases (complaint & complaint), alleging that the defendants are offering up counterfeit jewelry that they are passing off as being made from authentic Chanel materials, such as buttons.

A Bit about Competition

The European Commission confirmed this week that it “has informed Pierre Cardin and licensee Ahlers [Group] of its preliminary view that [they] may have breached EU antitrust rules by restricting cross-border sales of Pierre Cardin-licensed clothing, as well as sales of such products to specific customers.” The Cardin investigation is particularly noteworthy, as it comes amid an increasingly-focused-effort by the Commission, which has set its sights on the fashion/luxury arena, as demonstrated in a strong of actions against fashion companies.

In some deal-making news in the fashion/retail, tech & web3 segments …

– “Data-driven” online provider of luxury accessories Fashionette AG will merge with its main shareholderThe Platform Group.

– Odore has raised $5M in a Seed round. The customer engagement platform’s clients include L’Oreal Group, Dior, LVMH, etc.

– Stay Ai has raised $15.1M in a Series A round for its customer loyalty operating system for Shopify brands.

– InWorld AI has raised $50M in a new round for its generative AI-driven “Character Engine” for use in games & interactive experiences.

– Ayre Group has finalized agreements to take a controlling interest in nChain, the global leader in blockchain & Web3 technology, in a €500M-plus deal.

– Yuga Labs has agreed to acquire Roar Studios, a company that it says is “at the convergence of gaming, social media & the metaverse with deep technology and AI roots.