literal falsity might not matter with sufficiently sophisticated customers

G. W. Aru, LLC v. W. R. Grace & Co.-Conn., No. JKB-22-2636, 2025 WL 45827 (D. Md. Jan. 7, 2025)

I’m skipping most of the patent parts, though they are very much present in the case and interact with a falsity issue. The parties, GWA and Grace, compete in the manufacture and sale of carbon monoxide (CO)-carbon dioxide (CO2) combustion promoters, which are products used in the petroleum refining process. GWA alleged that Grace copied GWA’s patented combustion promoter technology and mounted a marketing campaign denigrating GWA’s products to customers.

A combustion promoter is a small particle used in fluid catalytic cracking (FCC), a process for refining crude oil into higher value products such as gasoline. Combustion promoters help convert CO into CO2, which is desirable because too much CO in an FCC unit can cause damage to FCC equipment (“afterburn”). CO to CO2 combustion promoters consist of a porous support particle, often made of alumina, impregnated with Group VIII noble metals (typically platinum or palladium). The noble metals are the active component in promoting the conversion of CO to CO2. GWA’s patent claims a combustion promoter that requires less noble metal to achieve the same level of CO combustion, using an “eggshell” distribution of noble metals instead of the traditional homogenous distribution. This is allegedly beneficial because noble metals are “very expensive,” and because it results in reduced emissions of nitrogen oxides (NOx), heavily regulated pollutants.

The challenged claims were made in a trade magazine for the petroleum industry; on a blog post on Grace’s website; and, sometimes with greater elaboration, in direct outreach to certain customers. There were (1) comparative performance claims; (2) lower NOx emissions claims; and (3) claims about noble metal on the outer surface of the combustion promoter particles.

For the comparative performance claims, there was no genuine dispute that the ads were literally false, and deception was presumed as a matter of law, but there were still disputes about materiality and injury, so a jury would have to decide liability. On the others, falsity and deception were also in dispute.

Comparative performance claims: Grace claimed that a customer trial showed that the usage rate for Grace’s product decreased by 62%64% compared to GWA’s (Grace told multiple customers that GWA was the comparator). Unfortunately for Grace, this was a “tests prove” claim, and the tests at issue undisputedly didn’t prove that. There were no data on afterburn. (I guess I’m the sole holdout treating data as plural.) And at most, the claims of 62/64% improvement were 52%/30%, respectively.

“Questions of who prepared the underlying data, what caused the errors, and whether a defendant knew the statements were false at the time, are of no moment to the question of falsity.” Grace cited Ony, Inc. v. Cornerstone Therapeutics, Inc., 720 F.3d 490 (2d Cir. 2013), for the proposition that “in a false advertising claim, it is relevant whether the alleged statements are fabricated or fraudulently created,” but that was inapposite. Ony involved “a peer-reviewed scientific journal and concerned an area of legitimate ongoing scientific debate.” “But here, there is no contention that the analysis of the data on which Grace relied for the comparative performance claims is the subject of legitimate scientific debate; on the contrary, it seems that the analysis is fairly straightforward for someone with the relevant technical knowledge. Moreover, Grace’s analysis was not published in a peer-reviewed scientific journal, but rather in a trade magazine and on its own website.”

NOx claims: Grace advertised that:

The greater the percentage of either palladium or platinum at the surface of the particle, the more accessible the metals are to provide an effective activity response. By incorporating a modified alumina, Grace’s optimised CO promoters (both platinum and palladium based technologies) can provide the same CO promotion activity at a lower metals level, with an additional benefit of lower NOx emissions. Based on this new technology, Grace has commercialized Optimized CPP, a low-NOx CO promoter that contains lower palladium levels while maintaining CO promotion activity.

GWA argued that these statements were literally false because Grace had no data supporting these claims. The court found a genuine dispute of fact on literal falsity. There was no express reference to testing; a reasonable jury could find that it wasn’t an establishment claim. It was not enough for GWA to argue that the data on which Grace relied were insufficient; anyway, there was a genuine issue of fact even on that. Grace argued that its “Optimized CPP” product uses less palladium and that its testing showed that decreasing the palladium level on the CPP additive resulted in lower NOx emissions. Even if that testing was over ten years old, that could still be supportive evidence.

Finally, the court noted that Grace did make more detailed, “tests prove”–style claims in follow-up email communication to certain customers. But the court wasn’t sure that such supplemental outreach constituted “commercial advertising or promotion”; there was a factual question on that for a jury.

Outer surface claims: Grace advertised:

The process Grace uses to incorporate palladium and platinum onto the combustion promoter naturally leads to a particle where the majority of the metals are located at the surface. However, the advanced alumina used for the optimised CO promoters results in an even higher proportion of the metals residing on the outer surface of the particle.

The advertisement then goes on to tout the advantages of that. In arguing literal falsity, GWA relied heavily on Grace’s statement in its amended answer that Grace “admits that its CP® CO to CO: combustion promoter is intended to have a uniform distribution of noble metal throughout the promoter.” At the preliminary injunction stage, the court found that Grace’s admission in its pleading supported a finding that the outer surface claims were likely to be literally false. But that wasn’t binding at the summary judgment stage:

If this case were simply a false advertising action, then Grace’s admission would conclusively establish the literal falsity of the “outer surface” claims. But GWA’s own claim for patent infringement complicates the matter. To prevail on its patent infringement claim, GWA must prove that Grace’s combustion promoter particle has a higher concentration of noble metals in the outer region of the particle as compared to the center. To prevail on the false advertisement claim, however, GWA must prove something that is close to the exact opposite—that Grace’s particles do not have a higher concentration of noble metals on the particle’s “outer surface.” There is nothing wrong with pleading in the alternative, but the very fact that GWA is intent on pursuing both theories suggests that summary judgment on the question of the distribution of noble metals in Grace’s products is premature.

To win its patent infringement claims, GWA argued that its testing showed that there was a higher concentration of noble metals in the “outer region” of Optimized CPP as compared to the center. But if that was true, “then there is at least some basis for believing that there is also a higher concentration of noble metals in the ‘outer surface’ of the particle. GWA argued that there was a meaningful difference between “outer surface” and “outer region,” but there was no clear explanation of “how one could distinguish the outer surface of a microsphere from the outer region.” “[A]lthough testing by GWA’s putative expert purports to show that there was no noble metal detected on the outer surface of the accused product, a reasonable jury could find that the testing is not conclusive, because the depth chosen to measure the ‘outer surface’ was somewhat arbitrary.” Given a crucial disputed issue in the case—whether Grace’s accused products have the kind of “eggshell” design claimed in GWA’s patent—it would be premature to resolve the issue in the false advertising part of the case.

What about materiality? There’s a circuit split on whether literal falsity also carries a presumption of materiality; the Fourth Circuit hasn’t weighed in, and the court assumed that materiality must still separately be shown. At the preliminary injunction stage, the court found that “cost efficiency” was likely to be material, and GWA provided testimony from industry professionals that all three claims were material. “A reasonable jury may well find this evidence convincing. But, Grace has produced countervailing evidence that tends to show that the relevant customers are sophisticated industrial firms that would likely do their own testing before implementing a new product. In short, whether Grace’s challenged statements were likely to influence the purchasing decision of the relevant consumers is a disputed factual question that the Court cannot resolve now.”

Nonetheless, because literal falsity doesn’t require evidence of deception, no further evidence that the ads deceived consumers would be required, which strikes me as logically inconsistent with the reasoning immediately prior; the whole literal/implicit falsity apparatus + materiality has developed into a formalism that is probably at this point more harmful than helpful to reaching just results.