This article has been written by Vartika Khanduja. It has been edited by Sonali (Associate, LawSikho).
It has been published by Rachit Garg.
Table of Contents
Introduction
Before we delve into the details of collaboration let us first understand what collaboration is and why it is needed. Collaboration is basically a practice of two brands coming together for the production and manufacture of a new product which has inputs and characteristics of both the brands that are collaborating.
Collaboration is similar to a partnership and joint venture agreement, the only difference being collaboration is an agreement for a short span of time or for a small project. Collaboration is a mechanism that benefits both brands, augments the business of the collaborating brands, expands the market reach, and increases the customer base of the brands by creating buzz about the product in the market.
In the highly competitive and dynamic fashion industry, these collaborations aid in the survival of the brands in the market. One of the most recent examples is the collaboration of Sabyasachi with H&M. This article shall look at the Nike and Louis Vuitton collaboration – the advantages of such collaboration and key clauses to remember while drafting a similar collaboration agreement
Details of the Collaboration
Nike is an acclaimed multinational company based in America that deals mainly in the design, development and manufacturing of sportswear and is one of the largest suppliers of athletic shoes and apparel and also indulges in producing sports equipment. Louis Vuitton is one of the most eminent fashion companies in the domain of high-end fashion. It primarily deals in shoes, watches, bags, jewellery etc. Both brands are at the top tier in their respective fields and are globally renowned as well.
The brands collaborated on the production of spiffy sneakers. Louis Vuitton revamped the quintessential Nike Air Force 1 sneakers with LV patterns and monograms making them snazzy. The project is called Nike Louis Vuitton. The Collection was inspired by the 1988 Album Cover “ It Takes Two”. 21 pairs of Nike Air Forces were made with the collaboration between Nike and Louis Vuitton.
The intention behind this collaboration is to make plush and super luxe sneakers. The brands have collaborated to create athleisure shoes that are an amalgamation of sports and luxury. This unveiling of the collection from the partnership of Nike and the French luxury fashion house definitely created a buzz in the fashion industry.
Advantages of the collaboration
Proliferation in Market Reach
Nike and Louis Vuitton are prodigious brands and their coming together for athleisure shoes will undoubtedly enhance the market reach of both brands. Both brands will benefit from the goodwill of each other. The unveiling of this collection has already created much hype in the fashion industry. This collaboration will elevate the market share of both the brands thereby resulting in an increase in profits and business of the brands.
Exchange of Information
Both the brands will be mutually benefited from while creation of such trendy sneakers when both the brands will come under one roof they will learn from each other with regards to the techniques, and methods which are used by the brands and most importantly creativity that is invaluable and will play a crucial role in the growth and development of the brands. Brands will learn about the core values of each other and authenticity.
Lucrative Profits
The sole object of any business is to generate profit and collaborations increase the sales of the brand which will lead to more profits and revenue for the brand. The Association of the French Luxury brand with Nike will undeniably increase the sale of the trendy shoes which are produced under this collaboration and that will be favourable to both the brands in terms of revenue and profit.
Unprecedented Product
Louis Vuitton generally deals with leather products. This is the first time that they are collaborating on non-leather products. Though they have had collaborations in the past and so has Nike, these collaborations persuade brands to come out of their comfort zone and try something new without investing too much and with a limited amount of risk and since both the brands are colossal and worldwide famous so chances of failure are meagre. This kind of Collaboration has always been profitable.
Top Notch Quality
When two big brands with such remarkable reputations come together for a collaboration, the quality will undoubtedly be unmatched. The Nike Sportswear Air Force 1 is revamped with LV designs and monograms giving them an unconventional and edgy look. The collaboration promotes the brands in general to create such a product which is of the best quality so that it marks an impression among the audience.
Important Clauses in a Collaboration Agreement
Recitals
- This clause gives the background of the parties who are entering into the collaboration
- It also includes the reason and intent of the Agreement.
- This clause also gives a brief detail of the product which will be created in this collaboration
Purpose
- This clause carries detail about the collaboration
- It also mentions the time period of the collaboration and its schedule
- The purpose of the Agreement and what each party is seeking from this agreement.
- How each party will contribute to the creation of the desired product
Confidentiality clause
- This clause talks about maintaining the secrecy of businesses.
- The parties shall keep the information each other confidential that they have gained while they were under this collaboration Agreement and shall not reveal any information to any third party without the written consent of the other party.
- Each party shall return all the access to confidential information of the other party which they received during the term of this Agreement.
- The parties shall keep the information of this collaboration confidential until the official announcement of the collaboration
Non-Compete Clause
- Parties shall not work directly or indirectly for the competitors of each other during the term of this agreement.
- Parties shall not enter into a collaboration agreement with competitors of each other till xx years after the termination of this Agreement
Commercial Clause
- This clause talks about how the profit from the collaboration will be shared among the Parties
- The consideration arrangement between the parties is included in this clause
- How the profits are shared and whether it will be a fixed amount or a percentage of the profit
- This clause also decides how much each party will reimburse in expenses of manufacture and advertising, and marketing of the product.
Investment Clause
- The amount of capital brought in by each party for the collaboration purpose
- How they will acquire funds for the collaboration; whether through investors or bank loans or some other way has to be mentioned
- How will they arrange for additional capital if it is so required in the course of the collaboration
- How they will manage for day to day expenses for the collaboration is also detailed in this clause
Duties and Obligations of Collaborators
- The duties of each party shall be discussed under this clause.
- Bifurcation of the step-by-step process of collaboration and what part each party shall do like in case of Nike X Louis Vuitton Nike will manufacture shoes and LV monograms shall be adorned by Louis Vuitton.
- Obligations of each party shall be discussed under this clause.
Reporting and Project Management
- This clause will talk about communication between the parties as good communication will ensure the smooth completion of the collaboration within the stipulated time.
- After completing each step of collaboration the party shall inform the other party and set out formal reporting requirements
- This clause talks about meeting schedules and reporting requirements which will depend upon the specifics of each project.
Intellectual Property Rights
- This clause will talk about the Intellectual Property that is created or used during this collaboration
- The Intellectual Property created under this Agreement shall be used only for the purpose of this Agreement.
- The ownership of background Intellectual Property which is created before this Agreement shall remain with the creator of such Intellectual Property
- The Parties shall renounce all the rights to Intellectual Property of the other party used in the collaboration agreement as soon as the term of the agreement comes to end.
- The Parties shall not disclose any third party without prior written consent Intellectual Property of another party to which it has right access under this Agreement.
Other clauses that must be included under the collaboration agreement are:
- force majeure
- severability
- modification
- termination
- post-termination obligations
- indemnity
- limitation of liability
- jurisdiction
- dispute resolution
Conclusion
Brand Collaboration agreements are one the successful arrangements as it benefits both parties. Sports and Luxury brand Collaboration have always been a knockout among the affluent class of society. People are now becoming health conscious and therefore the demand for elite sportswear is growing day by day. With an increase in the use of social media and a consequent increase in the number of fitness influencers, people are now demanding something comfortable and stylish. The urge to be fit has become a characteristic among the affluent class thereby making athleisure one of the most growing sectors of the fashion industry.
Brand Collaborations have many advantages such as an increase in market reach, increase in profits, and growth of the business. Still, as every coin has two sides, similarly, these kinds of collaborations have their own set of disadvantages such as if a collaboration does not leave a mark on the audience, the reputation and goodwill of both the brands will be damaged. Creative control is placed on the brands as they have to work within the parameters decided and cannot go beyond that and after every step, they have to report to the other brand. They also have to disclose their confidential information to the other brand and in absence of a stringent NDA, it might result in the leaking of trade secrets. The pros are dominant over the cons of such agreements and that’s why such collaborations are a hit among the brands and customers but one thing that each brand should consider while collaborating is that they ought to collaborate with such a brand which is in a symphony of their brand and this collaboration should complement both the brands.
References
https://www.highsnobiety.com/p/louis-vuitton-nike-virgil-abloh-sneaker-reveal/
https://hjsolicitors.co.uk/article/guide-to-collaboration-agreements/
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