literal falsity wasn't enough without evidence of lost sales or harm to goodwill

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.