G. W. Aru, LLC v. W. R. Grace & Co.-Conn., No.
JKB-22-2636, 2025 WL 2402194 (D. Md. Aug. 19, 2025)
Previous
decision resolving some pretrial issues; this opinion comes after a bench
trial, which resulted in a ruling for defendant Grace on both the patent and
false advertising claims:
GWA and Grace both sell to
refineries products called CO-to-CO2 combustion promoters. At a high level, GWA
claims that Grace copied GWA’s patented combustion-promoter technology while
embarking on an advertising campaign that falsely inflated the performance of
Grace’s products and denigrated GWA in the eyes of potential buyers.
At least for people in sophisticated industries, the
decision offers a roadmap for convincing a court that advertising claims are
not ultimately material, no matter how factual or central they seem at first.
Domestic buyers of combustion promoters are about 110 FCC
refineries in the United States, owned by about thirty companies. (Neither
Grace nor GWA is the biggest competitor in the field, if you’re wondering,
although it’s not a crowded market; Grace has between 20-30% of the market and
GWA has made at least some sales to about half of the relevant companies. In the
abstract, “if a sale does not go to Grace, it is at least as likely (indeed,
probably more likely) that it would instead go to [largest player] JM rather
than to GWA.”
Grace’s OCPP purported to offer the same or similar
performance as CPP, but at a lower cost. It published an article entitled “CO
promoter technology development” in Petroleum Technology Quarterly, a trade
magazine for the petroleum refining industry. This stated:
A customer performed a trial
comparing Grace’s Optimized CPP technology versus a competitor’s lower
palladium promoter. … On average, the usage rate for Optimized CPP decreased by
64%.... Even though there was a lower usage rate of Optimized CPP, the
afterburn was reduced by 11% [compared to the competitor].
The article also claimed the “additional benefit of lower
NOx emissions,” and that OCPP particles have a higher proportion of noble
metals “residing on the outer surface of the particle.” The PTQ Article was
based on a case study of a trial conducted at Valero-Wilmington, which compared
the performance of GWA’s GFP with Grace’s CPP and OCPP. The author stated in an
internal Grace email that he wanted to “work” the analysis “into a marketing
package, to support the roll out of Optimized CPP, and to protect/capture
business vs GWA.”
Did claims in emails to potential clients constitute
“commercial advertising or promotion”? Yes, they were sufficiently disseminated
given the size of the market. “Taken together, a large minority of FCC units
throughout the United States received the promotional materials.” Grace argued
that the relevant market was worldwide market, but “the law is clear that an
organized campaign targeting a significant subset of customers is sufficient.”
The statements were prepared with the expectation of being used for a marketing
campaign, and were so used.
Falsity: Grace ultimately didn’t contest that there were
errors in the data and their evaluation. The comparative-performance claims were
literally false because they were not supported by the data on which Grace
relied. Some industry participants read PTQ regularly and consider it to be
well-known in the petroleum refining industry, while others never read PTQ or
have never even heard of it. “[I]n the absence of additional evidence specific
to a particular refinery, it is merely possible—not likely—that a buyer at that
refinery had read any portion of the Q2 PTQ issue (much less the specific
article at issue in this case) before purchasing OCPP.”
Grace also made a similar blog post, but “[t]he only witness
who testified to seeing the blog post before this lawsuit began was [plaintiff’s
principal] Mr. Aru himself.”
Grace also prepared “data sheets” containing much of the
same information, including comparative-performance claims, NOx claims, and
“outer surface” claims. These were often sent by email to refineries or shared
during meetings. They also often made more detailed claims about NOx emissions
(the “test-validated NOx claims”).
Although the article’s author put together a “marketing case
study,” he also contemporaneously received information from the data collector
that OCPP performed merely fifty-four percent better than the competition, not
sixty-four percent as Grace would later claim. Meanwhile, in internal Grace
communications, he repeatedly stated that OCPP’s performance as compared to GFP
was the same or merely slightly better, and stated that, in a trial at another
refinery, it actually performed worse. “In other words, at the very same time
that Grace was trumpeting a sixty-two or sixty-four percent improvement,
Grace’s internal communications show that the company knew the products
basically performed the same.”
The lower NOx emissions claims, however, had weak support;
because GWA had the burden of persuasion on falsity, it failed. The test-validated
NOx claims could be based on a ten-year-old study, because that study “included
data on at least one batch of combustion promoter that was materially identical
to modern-day OCPP.” GWA didn’t offer any reason to think that the underlying
science has changed. Even if Grace implied that its testing was recent and
conducted on actual commercial OCPP samples (as opposed to test samples that
were functionally equivalent), “misleading implications will generally not
support a finding of literal falsity.”
GWA’s real troubles were materiality and, relatedly, harm.
Although the comparative performance claims were likely to influence a
refinery’s decision whether to trial OCPP, they were unlikely to have much
influence on a refinery’s decision to purchase OCPP long term. And the
test-validated NOx claims (assuming falsity) were not likely to influence the
purchasing decision.
In the industry, advertising was just not very important:
Selling combustion promoters is not
like selling soft drinks. A splashy advertising campaign is simply not going to
move the needle very much for the target audience. The evidence at trial showed
that buyers in the combustion-promoter market are hard-nosed engineers and
corporate executives who are focused on their bottom line at their refineries.
They are inherently skeptical of any promotional claims—and they have the means
to independently verify such claims. They closely monitor, on an essentially continuous
basis, performance metrics at their facilities. Furthermore, they almost
universally insist on doing their own testing of any product before making a
long-term purchase.
Buyers in the petroleum refining
industry do not take advertisements at face value. Perhaps most strikingly, two
witnesses called by GWA expressly denied ever relying on something in a PTQ
publication when making a purchasing decision. …
Further, testimony indicated that
some customers might have found the comparative-performance claims implausible
on their face, or else too vague to be given any weight. Even if customers
thought the claims were accurate in the narrow sense of representing the
performance of that specific trial, they might still doubt whether the product
would perform as well in their own refinery. There is a high degree of
variability in FCC units, such that a product that works well in one unit might
not work nearly as well in another.
Ads do “play a limited, but important, role in getting the
seller’s foot in the door of a potential buyer.” Because of their continuous
monitoring, a refiner will “know pretty quick” after trialing a new product “whether
it’s working or not.” A trial does not guarantee a long-term sale, as multiple
instances in the record confirmed.
“Several of the issues highlighted in the Grace
advertisements—control of afterburn, control of CO emissions, control of NOx
emissions, and cost-effectiveness—are among the most important considerations
for combustion-promoter buyers.” Thus, the comparative-performance claims were,
at least in the abstract, likely to influence a refinery’s decision to trial
OCPP. “Although purchasers are inherently skeptical of promotional claims, they
do not ignore such claims either. Instead, they consider promotional claims as
part of the totality of information they would review in deciding whether to
try out a new product.”
Non-advertising factors such as risk, price, and vendor
relationships also affect buying decisions. Grace often charges more than competitors,
in part because it offers high-quality technical support and can often
troubleshoot within a twenty-four- to forty-eight-hour window, which is “among
the best” in the industry and which GWA couldn’t always match. Each day that an
FCC unit is offline could translate into “thousands or tens of thousands of
dollars” lost. Grace is also more protected against supply disruptions than
GWA, and, as a larger company, offers a full range of products, allowing it to
offer package deals and a single source solution. Combustion promoters are a
small percentage of refineries’ costs, on the order of five percent or less of
refineries’ spending on FCC products, so they may not be central to purchase
decision.
Ultimately, the comparative-performance claims were likely
to influence a trial, but not a long-term purchase. And the
“test-validated NOx claims” were also unlikely to influence the buying
decision—not even for a trial run.
In these circumstances, it didn’t matter that the statements
“relate to inherent qualities of combustion promoters” or “that Grace hoped
that its advertisements would influence consumers.” “Clearly Grace must have
expected some benefit from its advertisements; the Court would not lightly
conclude that Grace views its own advertisements as a waste of money.” But
there’s a differnece between finding that advertisements “lead to prospects” in
the relevant market and finding that the advertisements were “likely to
influence any purchasing decision.” Not all advertising is material as a matter
of law. Still, Grace’s intentions “are highly relevant insofar as they reflect
the outcomes that seasoned industry insiders expected from the advertisements.”
“[N]umerous courts have found an absence of materiality in
Lanham Act false-advertising cases when the target audience consisted of
sophisticated individuals who were unlikely to be swayed by promotional
materials.” But in the market here, a trial was a sale, “albeit a small one,”
and the statements here were material to a decision to run a trial—the only way
for a refinery to evaluate claims like this. The court also noted that, “although
the exact scale of the errors in the comparative-performance claims is unclear,
Grace’s own communications suggest that they were overstated by at least a
factor of two. This was no minor misstatement; instead, Grace’s
comparative-performance claims were simply wrong, perhaps extremely wrong.”
That’s relevant to materiality too.
Even though no witness admitted to being influenced by an
ad, “the Court infers from the evidence that the advertisements were likely to
influence purchasers’ decision to run a trial.” That’s enough for materiality,
which is distinct from injury. [It wasn’t always, historically.]
And GWA was unable to show injury on a refinery by refinery
basis. No witness testified that the challenged claims had any actual influence
on their decisions or caused them to think less of GWA or GWA’s products
(though they agreed that this was hypothetically possible), and GWA was able to
identify only a single lost sale (but it didn’t seek disgorgement for that
refinery, and the reason for the lost business wasn’t based on Grace’s ads but
on errors on GWA’s end).
GWA argued that, because it sought disgorgement, it need not
prove “actual damages, only a likelihood of injury.” But likely injury is an
element of the underlying liability determination (as it isn’t for trademark
infringement). “[W]henever a plaintiff seeks to invoke the Lanham Act to remedy
a past violation, it must show that the violation proximately caused an actual
injury.” The requirement that a plaintiff seeking monetary relief for past harm
have suffered an actual injury
“is not a minor or technical
element of a Lanham Act claim; indeed, as the Supreme Court has explained, it
is the core requirement that a plaintiff ‘show economic or reputational injury
flowing directly from the deception wrought by the defendant’s advertising’
that assures Article III standing in Lanham Act cases.” Stemming as it does
from foundational jurisdictional principles, this requirement is not lessened
when the financial remedy sought is equitable (e.g., disgorgement of ill-gotten
profits) rather than legal (e.g., damages) in nature.
[Now do trademark!] A Lanham Act plaintiff seeking equitable
monetary relief need not prove the specific dollar amount of harm it suffered,
but still must satisfy the actual injury requirement. But what about cases that
say things like “[t]he Lanham Act permits recovery of profits because actual
damages are often difficult to prove. It ‘shifts the burden of proving economic
injury off the innocent party, and places the hardship of disproving economic
gain onto the infringer.’ ” Hard Candy, LLC v. Anastasia Beverly Hills, Inc.,
921 F.3d 1343, 1353 (11th Cir. 2019)? They must “be read in harmony with Lexmark’s
admonition that a Lanham Act plaintiff seeking monetary relief must plead and
prove actual injury proximately caused by the defendant’s conduct.” Such cases
mean only “that a plaintiff (1) need not prove the specific dollar amount of
losses it suffered and (2) need not prove economic harm at all, because
non-economic harms, such as a loss of goodwill, are sufficient.” [How are those
shown in trademark cases, again?]
The statute’s burden-shifting on disgorgement “means at most
that, if, but only if, a disgorgement-seeking plaintiff has persuaded the
factfinder that it suffered some injury proximately caused by the defendant’s
false advertising, then the burden shifts to the defendant to prove that
certain sales were not attributable to that false advertising.… In other words,
a plaintiff can unlock the doors to the Lanham Act’s favorable burden shift
only after it has first proved that it suffered an injury proximately caused by
the defendant’s violation.”
That was fatal. Even if Grace’s advertisements were “one
factor among many that may have contributed, in some attenuated sense, to GWA’s
not having made sales to the refineries at issue, … that alone is not enough to
satisfy the proximate-cause requirement.” The injury (if any) “might instead
have resulted from ‘any number of other reasons.’ ” Nor did GWA show any harm
to its goodwill.
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