Is Gillette feeling the sting of online-only Dollar Shave Club?
December 21, 2015 03:42 PM
The Gillette Co. the 120-year-old shaving company owned by The Procter & Gamble Co., has sued online-only retailer Dollar Shave Club for allegedly selling razors using Gillette’s patented technology. But a patent expert says it appears to be an attempt to slow the growth of the upstart online retailer.
The lawsuit cites unauthorized use of patented technology, which is prohibited by law, and is intended to protect Gillette’s significant investment in razor technology, according to Procter & Gamble. The lawsuit seeks damages and an injunction to prevent Dollar Shave Club from selling any products infringing on Gillette’s patented technology.
Dollar Shave Club, launched in 2011, grew web sales 242% year over year in 2014 to $65 million, and won Internet Retailer’s E-Retail Growth Award for its website ranking in the Top 1,000 for at least two years and achieving the highest growth rate in 2014. The e-retailer has used cheeky online videos to promote its subscription service that sends a consumer razor blades for monthly fees of $3, $6 or $9.
Gillette responded in June with the launch of its own Gillette Shave Club that allows consumers to sign up for regular shipments of blades, with the least expensive plan charging $17.50 to receive five Mach3 Turbo cartridges every five months.
A spokesman for Dollar Shave Club, No. 319 in the Internet Retailer 2015 Top 500 Guide, says the company is looking into the litigation but has no comment.
The patent describes a razor blade with a sharpened tip, a layer of hard coating on the cutting edge and an overcoat layer containing chromium, which, according to the Gillette complaint, "provides the razor blade with excellent shaving characteristics from the first shave onwards, and promotes durability."
The lawsuit alleges that several Dollar Shave Club razors, including The 4X, The Executive and The Humble Twin, violate the patent.
Deborah P. Majoras, chief legal officer of P&G, in a statement said, “Our patents help protect the many technical advancements we’ve made through the years—and when it becomes necessary, we take action to protect these important assets.”
David Pratt, president of M-CAM International, a financial firm that analyzes the underpinnings of patent assets, says his company’s analysis shows Gillette’s patent fails to meet the standards of being novel and nonobvious, and that the blade coating is a retread of earlier technology that both Gillette and Warner Lambert Co. LLC, a pharmaceutical and consumer health care company that is a subsidiary of Pfizer Inc., have used in products previously.
“My guess is that (Gillette) is feeling the pinch of Dollar Shave Club gaining market share rapidly, particularly online, and they’re looking for a way to slow (Dollar Shave Club’s) momentum,” Pratt says.
The launch of Gillette Shave Club was “a fast move” for such a large brand, Ali Dibadj, a Sanford C. Bernstein consumer products analyst said in June. Procter & Gamble holds about 70% of the global market for razors and blades. Gillette is the leading brand with annual sales of $7.9 billion and a brand value of $20.4 billion as of May 2015, according to Forbes.
A Procter & Gamble spokesman would not respond to Pratt’s comments, saying only, "We're confident in our technology, confident in our patents and confident in our case."