court upholds nine-figure verdict in false advertising case

Guardant Health, Inc. v. Natera, Inc., 2025 WL 2106522, No. 21-cv-04062-EMC (N.D. Cal. Jul. 28, 2025)

Previous opinion discussed here. Guardant sued Natera for falsely advertising a clinical test; after the court denied a PI, it conducted a trial at which Natera was held liable for willful false advertising under the Lanham Act and California law. The jury awarded $75 million in damages, awarded $175 million in punitive damages under California law, and issued an advisory verdict recommending $42 million in disgorgement. It also rejected Natera’s false advertising counterclaims. The court here resolves post-trial motions, including some discussion of the jury instructions.

The jury found Natera’s advertisements were false by necessary implication. The ads compared specific performance metrics of Signatera and Reveal, the parties’ competing products, from two separate studies. “[M]issing from the side-by-side advertisement was adequate context of the differences in the studies that could lead to further explanation why specific key metrics were not actually comparable on an apples-to-apples basis.” The comparisons, in context, were “statistically invalid and misleading” because of differences in the underlying data sources. This wasn’t puffery. Natera’s advertisements presented “specific and measurable” claims of superiority of Signatera over Reveal.

not an apples to apples comparison

Advertisements using an “ ‘apples-to-oranges’ theory of falsity” are literally false by necessary implication “where non-comparable products are portrayed as otherwise equivalent (except for the superior or inferior aspect being illustrated in the advertisement).” Interestingly, the court actually gave this as part of its instructions, which stated in part:

A statement is literally false by necessary implication when it does not explicitly state something that is untrue, but considering the advertisement in its entirety, the only reasonable interpretation of the statement is that it is untrue. Advertisements using an “apples to oranges” comparison are literally false by necessary implication where things that are non comparable are portrayed as otherwise equivalent.

The jury could properly find that Natera’s advertising statement was false because it “omits differences which would have been material to recipients.” And the metrics in the ad, as the ad itself said, were “key” to the products’ functions and therefore to purchase decisions. “Indeed, the fact that Natera highlighted these metrics in its advertising campaign against Reveal suggests Natera is being a bit disingenuous in now asserting their metrics are not really material.”

Consistent with the amount of money at stake, Guardant also provided a survey to show that the ads affected respondents’ perception of product quality (69.7% of oncologists “understood the main message of Natera’s email advertisement to be that Signatera is superior to Guardant’s Reveal”), as well as evidence that ads of this type affect doctors’ purchasing decisions. The accuracy of tests like these ones “undoubtedly” concerned an inherent quality or characteristic of the product.

Commercial advertising: Natera argued that it was just disseminating educational materials, not ads. But the evidence at trial showed that their purpose was to influence consumers. The comparison chart was “provided to the sales force” and “used by the sales force in meetings with oncologists and physicians for the purpose of influencing customers (oncologists and physicians) to buy its tests.” The ads were widely disseminated in the relevant market, through thousands of emails. And Guardant presented evidence that Natera made its false claims with the express economic motive to advance the sale of Natera’s test over Guardant’s. “The ‘education’ here was intended to drive sales.”

First Amendment: A false ad is not protected speech. Natera argued that, because the comparison advertisement consisted of results from two scientific studies, ONY, Inc. v. Cornerstone Therapeutics, Inc., 720 F.3d 490 (2d Cir. 2013), precluded liability and required treating the ad as a statement of opinion in a scientific debate. “ONY does not categorically immunize false statements about peer-reviewed studies.”  Instead, “[s]tatements in peer-reviewed, published scientific articles are entitled to protection against Lanham Act liability” because, per ONY, they’re opinion rather than fact.  Specifically, for peer-reviewed scientific studies, “conclusions from non-fraudulent data, based on accurate descriptions of the data and methodology underlying those conclusions, [and] on subjects about which there is legitimate ongoing scientific disagreement ... are not grounds for a claim of false advertising under the Lanham Act.”

However, “statements made within the academic literature and directed at the scientific community” are distinguishable from advertising “statements made in commercial advertisements and directed at customers.” [The difference here from the Fifth Circuit’s Plastipure decision, on which the court (I think correctly) relies, is that the ads in Plastipure were not directed to doctors. But they were directed to specialist consumers, and neither doctors nor other highly trained professionals are necessarily good at spotting problems in ads that don’t give the full context of a study. (I don’t think they’re necessarily good at spotting problems in full studies either, but the Second Circuit’s holding really does need to be confined to that scenario or, as everyone recognizes, advertising regulation would collapse.)]

Here, there was substantial trial evidence that Natera did not merely reproduce and then accurately describe the results of a scientific article. Instead, Natera (not scientists in a peer-reviewed, published scientific article) placed, what the jury found to be misleading, apples-to-oranges comparisons of the studies into a side-by-side format.

The instruction on this point included:

Statements in a commercial advertisement or promotion which are based on test results from a peer-reviewed, published scientific study cannot be literally false unless that party challenging the advertisement proves that:

1. The statement in the advertisement of promotion is not, on its face, supported by the peer-reviewed, published science study. In other words, even if the study is reliable, it does not establish the statement at issue in the advertisement; or

2. The statement conveys a false message that is beyond the scope of the peer-reviewed, published scientific study, such as comparing test results from a different study when the results are not actually comparable; or

3. The statement is supported by the peer-reviewed, published scientific study but the results of the study were fabricated or fraudulently created.

A party also may show that a commercial advertisement or promotion that relies on a peer reviewed, published scientific study is misleading if it reports results from the study in a way that is deceptive and that deceived a significant portion of the commercial audience.

The court also found that the jury was properly instructed on awarding corrective damages. As a direct competitor (in fact, the other player in a two-player market), Guardant was entitled to a presumption of commercial injury once the jury found material misleadingness. And it also presented “substantial evidence that Natera’s advertisements affected Reveal’s sales and that Guardant needed prospective corrective damages to remedy the past wrong.” Even though Guardant’s test at the time of the ads was a version no longer on the market, the ads targeted Guardant’s products in general as “tumor-naïve” tests, and the next generation was also “tumor-naïve.” Given that it was the immediate successor to the targeted test and “reasonably proximate in time” to the ads, harm was plausible.

Guardant’s evidence also reasonably supported the jury’s finding of willfulness. I didn’t go back to see when these statements were made, but apparently one doctor told Natera that the comparison between the two studies would be “unfair” and characterized it as “a bit like comparing apples and pears.” In addition, general competitive statements supported the willfulness finding with statements such as: “We need to be laser focused … or we will lose to Guardant. We need to put more intensity – this is a war we are entering,” “we need to go to the mat here” and “[s]pend whatever is necessary to salt [Guardant’s] launch” of Reveal. Testimony indicated that Natera sent about 10 emails to each oncologist.

Punitive damages were available on the California claims. The $175 million in punitive damages worked out to a 2.3x multiplier for the damages, “well within the range of an appropriate ratio.”

The court also declined to grant remittitur of the damages award; the jury accepted Guardant’s expert’s 3x multiplier for $75 million in prospective corrective damages based on the $24.8 million Natera spent on its anti-Reveal campaign.

The court unsurprisingly also granted a permanent injunction, though it refused Guardant’s request to require Natera to notify customers that a jury unanimously found its advertising comparing the performance of Signatera and Natera was false. “The jury’s award of prospective corrective damages is an adequate legal remedy for this request, thus no further equitable remedies will be entered.” But Natera was enjoined from comparing the tests in terms of the advertised qualities “based, in whole or in part,” on the two studies at issue.

The jury recommended $42 million in disgorgement, which was about 44% of Guardant’s request. The court crunched the numbers on its own, as is appropriate, and found attributing 50% of Natera’s sales of Signatera to the false advertising to be reasonable, given that Natera exceeded its projected sales by about 40-60% and Guardant’s projections were short by about 50%. That led to disgorgement of a bit over $37 million. Disgorgement was appropriate to prevent Natera’s unjust enrichment; willfulness supported disgorgement as well.

Guardant also sought a 1.5x multiplier for the actual damages of $75 million. The Lanham Act allows a court to adjust a Lanham Act award if it finds “that the amount of the recovery based on profits is either inadequate or excessive” up to 3x. But actual damages should “constitute compensation and not a penalty.” How to square these dueling goals? “Courts sometimes award treble damages because economic harm is hard to prove, where there is loss to reputation and goodwill, and to deter future infringing conduct.” Here, though, there was only vague testimony about “the damages that have been done to the reputation of this product,” and Guardant’s damages expert testified that $75 million was “necessary in order to put [Guardant] back in the position they should have been, level the playing field,” and “correct the impressions that have been left in the market.” The jury apparently accepted this testimony. “[A]n assertion by a CEO that additional damages should be awarded for e.g. loss of goodwill, without any further evidence, does not warrant an additional enhancement of the jury’s award of $75 million for corrective advertising.” This was especially true given the punitive damages award under state law. Willfulness alone didn’t justify a multiplier where “the actual damages awarded already compensate for the alleged harm.”

Prejudgment interest: Section 1117(a) doesn’t mention prejudgment interest, but 1117(b) (treble damages for counterfeits) does. And:

In Y.Y.G.M. SA v. Redbubble, Inc., 75 F.4th 995, 1008 (9th Cir. 2023), the Ninth Circuit explicitly noted that there is an express provision awarding prejudgment interest in Section 1117(b), but not in Section 1117(c) [statutory damages for counterfeits]. The Court applied traditional statutory interpretation tools to find this omission was intentional by Congress, and thus prejudgment interest was not available under Section 1117(c).

[Ah, if only the Supreme Court had noticed a similar issue with the noncommercial use exception to dilution’s lack of a “use as a mark” limitation! Anyway.] Expressio unius est exclusio alterius: “When Congress includes particular language in one section of a statute but omits it from a neighbor, we normally understand that difference in language to convey a difference in meaning.” The same logic applies to regular infringement damages/profits. Also, prejudgment interest is supposed to make plaintiffs whole, but the damages here were for prospective corrective advertising. And disgorgement also doesn’t need prejudgment interest to make a plaintiff whole. “Guardant was not awarded monetary damages for past lost profits, profits that it ‘lost [the] opportunity to invest.’”

The court also denied Guardant’s motion for $22 million in attorneys’ fees. Although the jury found the false advertising willful, this wasn’t an exceptional case. The key factors are (A) frivolousness; (B) objective unreasonableness; and (C) considerations of compensation and deterrence. “Natera’s litigation positions were not so unreasonable as to render this case exceptional.” Summary judgment was granted to Natera in some parts of the case, to Guardant on others, and mostly the case went to trial on disputed issues. “[A] well-fought case where one side wins on all claims does not transform a Lanham Act case into one that is exceptional. Were that the case, attorneys’ fees would be awarded in almost all Lanham Act cases…. Success at a jury trial does not deem the opposing party’s positions weak or frivolous.”

As for litigation conduct, Natera got sanctioned already for certain conduct, and no further sanctions were warranted. Nor was it exceptional to keep advertising after Guardant sent a cease-and-desist letter; Guardant sued six days later.