Gillette sues Dollar Shave Club for patent infringement
Gillette has opened a new front in the razor wars.
The Boston behemoth’s parent company filed a patent lawsuit on Thursday against Dollar Shave Club, alleging that its young rival is using patented formulas to make copycat blades.
The legal scrap follows Gillette’s decision earlier this year to start its own subscription service to fend off Dollar Shave Club and others in the burgeoning online razor market.
“They are now the defendant in a patent infringement suit against a very large, very deep-pocketed competitor who is probably not happy with their prices being undercut,” said Ronald E. Cahill, an intellectual property lawyer at Nutter McClennan & Fish LLP in Boston. “So I wouldn’t expect Gillette to go easy on Dollar Shaving Club.”
The lawsuit said Dollar Shave Club’s shaving products — the “Humble Twin,” “The 4X” and “The Executive” — violate a patented formula Gillette invented to coat its razors and improve the quality of shaves. That includes Gillette’s popular and pricey Fusion line of shavers.
Dollar Shave Club declined to comment.
The company, based in Venice, Calif., entered the $2.4 billion razor market in 2012, offering blades and razors via online subscription for much less than Gillette, and launching an Internet marketing campaign mocking Gillette.
Kara Buckley, a spokeswoman for Proctor & Gamble Co., which bought Gillette in 2005 for $57 billion, said the lawsuit is not about squelching competition in the increasingly competitive shaving market. She said the 114-year-old company monitors the marketplace for products that infringe on its many patents and found the alleged violations.
“We don’t take that lightly,” Buckley said. “We invest so heavily in innovation, and we take every violation of our intellectual property seriously. And when necessary, we take legal action to defend it.”
Gillette’s blade coatings can have a huge effect on the quality of the shaving experience and are part of a process the company has perfected over time. Blades begin as steel that is melted, cooled, and shaped to specification before they are placed into a product and coated with layers that affect the sharpness and longevity of the blades.
The lawsuit, filed in federal court in Delaware, seeks an order that Dollar Shave Club stop using the formulas and unspecified damages, to be determined by a judge.
Analysts said companies can use patent-infringement cases to fair and unfair ends. Some present a way to offer a limited-time monopoly that allows a company to benefit from its innovation. In other cases, a patent-infringement suit can be an excuse to drain a competitor’s resources with hefty legal costs.
Cahill, whose father worked at Gillette and who represented an employee in a lawsuit against the company that was settled for an undisclosed amount, said Gillette has an industry reputation for fairness, not frivolousness.
“Their reputation is that they are aggressive but not unfair,” he said.
More than 800 million people use Gillette products worldwide and the company commands nearly 70 percent of the US market for men’s blades and razors, according to Euromonitor International, a research firm in London.
But with more men purchasing blades and razors online, companies like Dollar Shave Club and New York-based Harry’s have attempted to take market share from Gillette by offering lower-priced options and doorstep delivery.
Dollar Shave Club said in November that it had 2.4 million members and posed a threat to Gillette’s dominance in the shaving market.
Harry’s declined to comment on the lawsuit, but a spokeswoman said the company has about 2.6 million active members.
Earlier this year, Gillette launched Gillette Shave Club. While the company did not disclose how many members it has, its website promises “fresh blades to your door” and free shipping.
Online sales of razors and blades climbed 70 percent to $189 million from 2013 to 2014, according to Slice Intelligence, a market research firm in Palo Alto, Calif., and are expected to grow again this year.
Slice said that in 2015, Dollar Shave Club had the top market share of online sales at nearly 53 percent, versus 20 percent for Gillette and 10 percent for Harry’s.
In October, P&G reported that net sales in its grooming business, which includes Gillette, Braun, and Venus, fell 14 percent in its most recent quarter, to $1.7 billion, compared with the same period in 2014. P&G does not separate out Gillette’s shaving sales in its reports.
David Pakman, whose venture capital firm, Venrock, invested in Dollar Shave Club after he saw its YouTube commercial lampooning the prices of Gillette razors, said the move by Gillette is typical of a company “late to the game and in decline.” He said Dorco, a South Korean razor manufacturer that supplies Dollar Shave Club has sold its coated blades around the world for more than a decade, and the technology is nothing new.
“We see this from time to time as a last-ditch effort to distract a major competitor,” he said of the lawsuit. “Unfortunately, it almost never works.”
Ali Dibadj, a retail analyst at Sanford C. Bernstein and Co., a research firm in New York, said the Gillette lawsuit clearly shows that Dollar Shaving Club “is bugging them” at a time when the shaving products market is changing.
His analysis has found that consumers are opting for lower-priced razors and using razors less.
He said his team has tested shavers and found that Gillette’s Fusion is by far viewed as the best shave, but it is also among the priciest.
A younger generation of consumers is more willing to shop online and to purchases less-expensive shaving products.
“The industry is much more difficult today than it’s been in a long time,” he said. “Gillette has to fight back with all of its power.”
Correction: Due to a reporting error, an earlier version of this story misidentified the company that David Parkman described as selling coated blades around the world for more than a decade. That company is Dorco.