written by William Cooper
December 23, 2019
Micallef Cigars has announce the launch of PredX – The Predicate Exchange. It’s a concept that involves pooling together predicate blends and intellectual property, and allowing members to submit, search, and license them to members. It’s intended to facilitate getting predicate (grandfathered) blends subject to the U.S. Food and Drug Administration (FDA) Deeming Rules. The intent is to simplify the ability to license these predicate blends and allow cigar brands to focus on using them to maintain innovation.
PredX refers to the “L” words. Regulation by the premium cigar industry has resulted in the industry putting a lot of effort into Lobbying, Legislation, and Litigation. These efforts have proven to be very costly with few results achieved. In parallel with those efforts, PredX introduces another “L” word – Licensing. Licensing involves pooling predicate blends and sharing them royalty-free among members. It’s a method that other industries such as automotive, aviation, and software have all developed. Currently, cigar brand owners wishing to use predicate blends retain legal counsel to facilitate in searching for the availability of predicate blends and license them from the owners. As for those predicate blends registered with the FDA, the FDA’s reporting system does not provide enough information to locate these predicates.
PredX will provide a repository of predicate cigar blends submitted by members. Other members who are a part of PredX will be able to search for predicate blends and make arrangements to license the blend. PredX is anticipating to have royalty fee, non-revocable licensing in perpetuity for the predicates that are part of the exchange, however, each member would retain ownership of its predicates and be free to license them to non-members.
Dan Thompson, President of Micallef Cigars told Cigar Coop that Micallef Cigars is committed to cover the costs to launch the organization in 2020. The plan is to ultimately transfer ownership of PredX to its members. During the early stages, the licensing approach and a Board of Directors will be formed. While Micallef Cigars has some idea for what the licensing model will look like, ultimately, they want the members to decide the best avenue for that approach.
Thompson outlined a timeline for the next five months in terms of launching PredX.
December 2019/January 2020: The idea of PredX is promoted with potential members to participate or become leaders. The idea is to get Letters of Intent from manufacturers stating their desire to explore the direction of PredX.
February 2020: Meetings will be held by the group and facilitated by Micallef Cigars. The initial order of business will be the election of the Board of Directors. During this time licensing approaches will be discussed and put to member vote. Micallef Cigars will also be prepared with a demonstration of how predicates may be curated and discovered by members.
March 2020: An initial view of member predicates available to license will be available.
April 2020: The initial PredX organization and licensing model will be operational with a predicate database up and running.
PredX also outlined their vision in its “Declaration of Collaboration” below:
“Declaration of Collaboration”
There comes a time in the development of an industry, when a collaboration of manufacturers becomes necessary to ensure our viability today and our existence tomorrow. Our livelihood is the service of our customers, whose inalienable rights include Life, Liberty, and the pursuit of Happiness.
We hold these truths to be self-evident, that to secure these rights, Manufacturers may band together, in full collaboration with our regulators, and institute a new organization tasked with the curation of our predicates and the enabling of “royalty-free” access amongst our members.
A new organization, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to promote the Safety and Happiness of our customers.
We, therefore, a single manufacture [sic], appeal to our colleagues across our industry, who before us established a marketplace of choices, for the rectitude of our intentions, do humbly, and in accordance with the demands of our marketplace, solemnly publish and declare, PredX – The Predicate Exchange is being formed to secure our right of innovation and our compliance with regulation so our mutual customers are Free to Choose cigars from a vibrant marketplace.
In looking across the history of commerce in our beloved United States, to better prepare for the future, the undeniable truth is that the Automotive, Aviation, and Software industries benefited dramatically through the sharing of intellectual property.
Therefore, we invite our fellow manufactures [sic] to create with us PredX, the Predicate Exchange, thus enabling collaboration across the Premium Cigar industry as we all seek to serve our mutual customers.
For more information on PredX – The Predicate Exchange, please join us at www.predx.org. You will find the proposed approach and may register for updated information as we progress.