Why Make Razors, When The Money’s In Blades?

LifeScan Scotland Ltd. v. Shasta Technologies, LLC. 3:11-cv-04494-WHO

Now here's a scenario that would offer Count Dracula a sweet tooth – er, a sweet fang. Like the proverbial manufacturer that makes razors to sell razor blades, LifeScan Scotland Ltd. makes the One Touch Ultra blood glucose meter and sells 40% of them at "below cost" and distributes the remainder for free. LifeScan then earns its bread and butter on the sale of disposable glucose test strips. The test strips incorporate electrical and chemical sensors necessary for the meter to do its work, and every time the customer uses the monitor, he or she must use—and then dispose of—a test strip. Shasta Technologies intended to skip straight to the profitable part of the business by developing a "half-price" disposable strip compatible with LifeScan's meters. And like Count Dracula eying an erstwhile sleeping victim, LifeScan bit back at this affront to its business model.

Before Shasta's strips could reach the market, LifeScan filed suit, claiming that Shasta infringed various patents. Among these was U.S. Patent No. 7,250,105, which generally claims a method of measuring the concentration of a substance [in this case glucose] in a sample liquid [blood] comprising the steps of (1) providing a measuring sensor device [the disposable strip], (2) applying a drop of blood to the strip, (3) using the glucose meter to measure the amount of glucose in the blood sample on the strip. LifeScan claimed that Shasta allegedly would indirectly infringe the method if it were allowed to manufacture and sell strips to customers, who would be the direct infringers.

In December 2012, when it appeared that the FDA was prepared to approve the Shasta strips, LifeScan sought—and won—a preliminary injunction preventing Shasta from bringing its strips to market, in the process overcoming Shasta's argument that the sale and distribution of LifeScan's meters exhausted the '105 patent because the meters substantially embody the claimed method. Judge Davila found that LifeScan was likely to establish that its patent was not exhausted on two grounds. First, because the patent requires the use of both a meter and a strip, "the sale of the meter by itself ... casts the applicability of exhaustion into doubt." Second, because it gives away some meters for free—and hence there is no "sale" that exhausts its patent. But Shasta, like Count Dracula's nemesis, Professor Van Helsing, had its defense in the ready.

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