Wednesday, November 06, 2019

pleading falsity can be done even with sophisticated consumers

10x Genomics, Inc. v. Celsee, Inc., 2019 WL 5595666, No. 19-862-CFC-SRF (D. Del. Oct. 30, 2019) (magistrate)

Skipping the patent parts.  “10x is a life sciences technology company that markets and sells its Chromium product line, which provides researchers with the ability to measure gene activity on a cell-by-cell basis for large numbers of cells in a single experiment.” Celsee’s Genesis System “is designed to capture and isolate single cells, … allowing the user to track a molecule and the cell of origin for that molecule.”

10x successfully alleged false advertising: Celsee advertised a 70% cell capture rate. Unconvincingly, Celsee argued puffery. And it argued that 10x failed to show an industry standard for making cell capture rate calculations, and that it didn’t specify how the 70% figure was calculated.  10x nonetheless sufficiently alleged literal falsity by alleging that “market participants evaluate the performance of single cell systems based on the cell capture rate, which the complaint defines as ‘a measure of the percentage of input cells that are assayed in each experimental run.’” 10x claimed to have a 65% capture rate. Celsee advertised using the tagline “Because every cell matters,” and Celsee ads and brochures claimed “[d]eep and accurate view of cell populations with >70% capture of input cells.” This figure allegedly measured only the percentage of cells caught in the teeny little wells it used that were actually analyzed, while not counting the cells put into the system that never make their way into the wells.   It was plausible that this was literally false because the calculation failed to account for all the cells put into the system, and that this was objectively inaccurate.

This was also plausibly misleading, since 10x alleged that cell capture rate is “[a] key criterion on which market participants evaluate the performance of single cell systems.” [Not to mention Celsee’s own tagline.] It was plausible that targeted consumers would presume the parties’ advertised cell capture rates were directly comparable, and that Celsee’s advertised 70% rate was intended to make its product seem superior.

Celsee argued that 10x didn’t sufficienly plead materiality “because researchers purchasing single cell technology would not plausibly base their purchase decision on a non-specific statement of capture efficiency without first understanding the method of calculation.” Nope. If (as alleged) there was a superiority misrepresentation that confused consumers, and if cell capture was a key criterion for customers, that was enough.

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