In preparation for launching Beyond Tobacco™ cigarettes, which is set to take place in Q4 2020, the Company has completed and filed a U.S. patent application for a proprietary refinement process of base cigarette material, which contributes to the tobacco flavour and aroma of Beyond Tobacco™ cigarettes, which contain no tobacco whatsoever. Incumbent cigarette producers such as the ‘Big Tobacco’ firms are known to apply for and hold as many as several thousand patents to protect their rights to innovations and processes, which has become especially common with the advent of new categories such as smokeless and reduced risk products. Because the flavour and aroma of Beyond Tobacco™ cigarettes are defining features of the product, it has become a priority for Taat to complete this patent application so that the Company can retain rights to this process for the 20-year lifespan of a U.S. patent upon finalization.
Taat Lifestyle & Wellness Ltd. (OTC: TOBAF) (CSE: TAAT) is pleased to announce that it has completed and filed a patent application with the United States Patent and Trademark Office (“USPTO”) for the proprietary refinement process of the base material for Beyond Tobacco™ cigarettes. This process contributes to the tobacco flavour and aroma of Beyond Tobacco™ cigarettes, which is the product’s hallmark feature as a tobacco-free and nicotine-free alternative to tobacco cigarettes. To date, even before officially launching Beyond Tobacco™ cigarettes to the public, the Company has multiple potential sales channels in order. In the course of Q3 2020, Taat appointed a former commercialization executive and a recently-resigned lead strategist from Philip Morris International to its Chief Revenue Officer and Chief Executive Officer roles, respectively. On September 2, 2020, Taat announced it had successfully negotiated favourable pricing terms for production of Beyond Tobacco™ cigarettes with a commercial-scale North American cigarette manufacturer that also produces for global and regional brands of tobacco cigarettes. With the launch of Beyond Tobacco™ cigarettes set to take place in Q4 2020, the Company’s management has elected to pursue patent protection of the proprietary attributes of its flagship product. Upon granting of the patent for which the Company recently applied, Taat would stand to benefit from this protection of its base material refinement process for a period of 20 years in the United States.
Taat has developed the Beyond Tobacco™ cigarette as a tobacco-free and nicotine-free alternative for current tobacco smokers who wish to continue the “ritual” of smoking tobacco cigarettes, while leaving nicotine behind. Based on data from the World Health Organization, there are currently 1.3 billion tobacco users worldwide1. Attempts to quit smoking tobacco are frequent, with CDC data indicating 55.1% of adult smokers had attempted to quit in the past year, though only 7.5% successfully quit smoking in that timeframe2. Despite the fact that mass-market tobacco cigarette alternatives such as gums, lozenges, and vaping deliver nicotine to users, quitting attempts made by using such alternatives tend to result in relatively frequent abandonment, which suggests tobacco smokers are attracted to attributes other than nicotine, such as the sensory elements of smoking a combustible product. To address this, the Company has sought to closely replicate the experience of smoking a tobacco cigarette with meticulous engineering of the experience of smoking Beyond Tobacco™. Feedback from early-stage user testing of Beyond Tobacco™ cigarettes has generally shown a consensus that Beyond Tobacco™ does not have any significant experiential differences from a tobacco cigarette. Many respondents commented on the scent and flavour of Beyond Tobacco™ cigarettes, expressing disbelief that the product does not contain any tobacco. As the refinement technique that contributes to these sensations has been lauded as the “secret sauce” of Beyond Tobacco™ cigarettes, the Company has recognized the importance of patent protection for this proprietary method.
Patents have long played a key role in enabling the tobacco industry’s largest players to capture and maintain market share with innovations in tobacco smoking, as well as related alternatives such as denicotinized tobacco as well as smokeless and reduced risk products (“RRP”). For instance, in 1997 Philip Morris International (“PMI”) was granted US Patent 5684241 to alter nicotine content in tobacco plants3, which reduced nicotine content by 80%4. In 2012, a study published on PubMed determined that between 1997 and 2008, there were 106 U.S. patents relating to perceivable elements of cigarette smoke (e.g., reducing quantity or visibility, improving odour), many of which were published by “Big Tobacco” firms to include PMI as well as Japan Tobacco International (JTI), and British American Tobacco5.
More recently, PMI7 and JTI8 were each listed in the 100 Top Patent Filers by the European Patent Office (2016 and 2019, respectively), with smokeless and RRP products cited as the principal focus of such patent filings. An announcement from PMI indicated it held 1,800 granted patents with nearly 4,000 pending applications, and it had invested more than USD $3 billion since 2008 relating to smoke-free products. JTI similarly announced it held 4,200 granted patents and had 2,800 pending patents, with a staggering USD $1 billion invested between just 2018 and 2019 alone in relation to RRP. Another study published on PubMed discovered that as New Nicotine Delivery System (“NNDS”) cigarette alternatives gained popularity in the early 2010s, large players in the tobacco industry sought to gain competitive advantages such as patent rights by investing in NNDS companies. A unique strategy to attain a similar effect was undertaken by Imperial Tobacco in 2012 by forming its Fontem Ventures subsidiary in the Netherlands “to acquire, manage, operate, encumber and dispose of property, including patents and other intellectual property” related to e-cigarettes9.
Given the dominant role that patents and intellectual property rights have in the tobacco and cigarette industries, the Company has made protecting its proprietary method a top priority before Beyond Tobacco™ cigarettes are launched to the public. This is being done in the interest of being well-positioned to potentially establish and sustain a long-term market position as an innovator of experience-driven alternatives to tobacco cigarettes without the use of tobacco or nicotine.
“Patents are of incredible importance in this industry because when you consider that the global market for tobacco is worth more than US $800 billion, you’re not just protecting years or decades of research and hard work, you’re also protecting the ability to recover your investment and earn a profit,” said Setti Coscarella, Chief Executive Officer of Taat. “The Company has been on the path to commercialization for just a matter of months, which followed a lengthy period of research and development for Beyond Tobacco™ cigarettes. As confident as I may be that the truly ‘magic’ parts of this product would be nearly impossible for anyone to duplicate, anybody who has worked in this industry knows that patents can be extremely cost-effective, given how expensive not having a patent can be in some cases. This is especially so when production scales up, and your proprietary techniques will inevitably need to be shared with third-party vendors at some point. Keeping proprietary methods secret is something you can control on a small scale – but when working towards doing business on a global scale, that type of control is out of the question, which means you need to plan accordingly as early as you can by filing and diligently prosecuting a patent for the important parts of your product and its manufacturing process. With that in mind, getting a patent filing in motion was one of the top items on my agenda when I got hired on as CEO. I’m glad that our patent application is off the ground as we work towards finalizing our execution strategies for the launch of Beyond Tobacco™ cigarettes.”
On behalf of the Board of Directors of the Company,
TAAT LIFESTYLE & WELLNESS LTD.
Setti Coscarella, CEO
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About Taat Lifestyle & Wellness Ltd.
Having developed Beyond Tobacco™ cigarettes, which contain no tobacco or nicotine, Taat’s objective is to introduce an innovative, experience-driven alternative to tobacco cigarettes for tobacco smokers who aspire to leave nicotine behind. Beyond Tobacco™ cigarettes, which are to be offered in “Original” and “Menthol” varieties, are designed to closely emulate every aspect of smoking a traditional cigarette. From the cigarette-style packaging and stick format, to the proprietary flavouring blend which imparts the flavour and scent of tobacco, to the draw sensation, and to the amount of smoke exhaled, Beyond Tobacco™ cigarettes have been meticulously engineered to enable smokers to continue enjoying the ritual of smoking, while discontinuing nicotine intake. Taat plans to launch Beyond Tobacco™ cigarettes in Q4 2020 and is seeking to position itself in the US $814 billion (2018)1 global tobacco industry to capitalize on the growing worldwide demand for alternatives to traditional cigarettes.