SAN FRANCISCO — A federal judge has sanctioned LifeScan Inc. for violating a protective order in a patent fight between companies in the blood glucose testing industry.
In an order issued Wednesday, U.S. District Judge William Orrick III of the Northern District of California ordered the Johnson & Johnson subsidiary to pay Shasta Technologies, Decision Diagnostics Corp., PharmaTech Solutions and Conductive Technologies a total of $41,914 in attorney fees. The companies moved for sanctions after LifeScan admitted it used confidential information to notify its rivals’ distributors of a preliminary injunction that had been issued against them.
Although Orrick found that LifeScan had violated the protective order, he declined to hold the company in contempt. Represented by Patterson Belknap Webb & Tyler partner Gregory Diskant, LifeScan claimed that it believed it was permitted to use the confidential information to contact its competitors’ distributors.
“LifeScan’s interpretation was wrong,” Orrick wrote. “But because there is no clear and convincing evidence that LifeScan did not have a good faith and reasonable interpretation of the protective order, the court finds that LifeScan’s conduct does not constitute contempt.”
LifeScan accuses Shasta Technologies, Decision Diagnostics Corp., PharmaTech Solutions and Conductive Technologies of violating its patents for blood glucose testing. The defendants sell test strips designed for use with a blood glucose monitor manufactured by LifeScan. LifeScan gives away and sells the meters below cost, hoping to turn a profit on sales of its own test strip.
U.S. District Judge Edward Davila granted LifeScan’s request for a preliminary injunction, but the sales ban was overturned by the U.S. Court of Appeals for the Federal Circuit this week. The court found that LifeScan exhausted its patent by giving a large chunk of its test strips to health care providers, though it had not profited from the transfers.
Though the sales ban was short-lived, the defendants claim that they were forced to buy back their products after LifeScan notified distributors. The defendants also sought $573,149 in lost profits on top of attorneys’ fees. Orrick declined to award lost profits, writing that the companies had failed to show a connection between their poor performance and LifeScan’s misconduct.
Lathrop & Gage partner John Shaeffer—who represents the defendants with lawyers at Ropers, Majeski, Kohn & Bentley—said the companies struggled to show lost profits because their products have only recently won the approval of the Food and Drug Administration.
“When you have a startup company that really doesn’t have a history of a business, how do you know what business it would have done?” he said.
LifeScan lawyer Diskant did not respond to a request for comment.
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