3d Circuit affirmance shows that false advertising damages remain hard to prove

CareDX, Inc. v. Natera, Inc., 2025 WL 2480117, No. 23-2427, No. 23-2428 (3d Cir. Aug. 28, 2025)

The court of appeals affirms the district court in this Lanham Act/coordinate Delaware state law case based on allegedly false claims Natera made about its organ transplant rejection detection product. A jury found for CareDx and awarded it damages, which were vacated by the district court.

The parties make and sell competing tests that use DNA to detect whether a patient’s body has rejected a transplanted kidney: AlloSure (CareDx) and Prospera (Natera). Natera’s advertisements pointed to results from two studies—a Natera study on Prospera and a CareDx study on AlloSure—to demonstrate Prospera’s superiority. Each study focused on accuracy: sensitivity (false negatives, which are especially dangerous as untreated rejection endangers patients) and specificity (false positives) as well as AUC (a composite measure of the two) and negative predictive value (measuring the percentage of correct negative results; higher NPV means fewer false negatives). The studies varied in their designs and methods.

The jury heard testimony that the CareDx study was multi-site, which meant that it could be generalized to the universal standard of care, while the Natera study was single-site, and thus “considerably less generalizable.” Likewise, the CareDx study used a prospective methodology, which created a lower risk of selection bias because patients were first selected and then biopsied and tested to see how AlloSure performed. But it also sometimes generated ambiguous results, “based on the reality that certain patients demonstrate partial rejection.” By contrast, the Natera study selected from already-existing patient samples that had been tested for organ rejection and were either “clearly not rejection [or] clearly rejection.” Also, the cohorts were different, which matters because the prevalence of the underlying condition—here, rejection—affects the sensitivity, specificity, and related results, precluding an apples-to-apples comparison.

Thus, witnesses from both sides testified that the studies couldn’t be directly compared—in contradiction to Natera’s advertising. The jury found 9 of 10 challenged claims literally false, found willfulness, and awarded $21.2 million in actual damages “attributable to Natera’s false advertising and/or unfair competition,” and $23.7 million in punitive damages “for Natera’s unfair competition.” The district court upheld the literal falsity finding but found insufficient evidence to establish the actual deception and reliance elements necessary for CareDx to recover damages under the Lanham Act, and in turn, establish the causation and harm elements necessary to recover damages under state law; prove wrongful interference with any business relationship, thereby precluding liability on CareDx’s unfair competition claim; and support a punitive damages award. Thus, the only remedy CareDx secured was an injunction. (Wonder what would have happened if CareDx had sought disgorgement.)

A plaintiff challenging establishment claims as literally false “satisfies its burden by showing that the tests did not establish the proposition for which they were cited.” There was sufficient evidence of that here.

For example, Natera represented that Prospera is “[m]ore sensitive and specific than current assessment tools across all types of rejection.” Based on evidence that “current assessment tool[s]” referred to AlloSure, a jury could reasonably find this was unambiguous and literally false, because Prospera’s specificity rate was lower than AlloSure’s in both studies, and the studies did not establish Prospera’s superiority given the evidence that the studies were not comparable. Similarly, claims of “better performance” “necessarily implie[d] that the studies are comparable and may be used to establish Prospera’s superiority.”

Natera argued that its claims couldn’t be literally false because they accurately reported the results of two studies. “However, by placing the studies’ results side-by-side, alongside claims that Prospera is superior to AlloSure, Natera necessarily implies that the results of the two studies are comparable and establish Prospera’s superiority. A claim of superiority based on comparison of incomparable metrics can be literally false.” So too with “Unparalleled precision,” which was not ambiguous in the context of a slide claiming superior sensitivity and NPV.

Likewise, a slide headed “[h]ighly sensitive across a range of rejection types and patients,” and a subheading stating, “[v]ariety of ethnic and racial demographics,” as well as “[a]ges,” including “[b]elow 18 years of age (n=49)” was also unambiguous. In context, “highly sensitive across a range of ... patients” above a subheading for various demographic groups, including an age group of under 18-year-olds, unambiguously conveys that it is highly sensitive for patients in that age group. Proximity mattered, and the study didn’t establish Prospera’s sensitivity for patients under 18 (since the ones in the study didn’t have any rejections).

For damages, a plaintiff must prove both falsity and actual deception. Although a plaintiff need not “prov[e] detailed individualization of loss of sales,” “there must be a showing of some customer reliance” on the false claim. CareDx’s evidence of consumer confusion, Natera’s success, and Natera’s willfulness didn’t suffice. (Once again I am pointing out that in a trademark case, courts would draw the opposite conclusions.)

The testimony of two CareDx employees about confusion was vague and conclusory, and failed to link the advertisements to any consumer purchasing decisions. For example, the testimony that the ads “caused a lot of confusion ... with our customers,” and that although there was not “significant patient impact initially,” later “there was more and more confusion, and then ... [more] usage of Prospera” lacked sufficient explanation. “These generalities do not satisfy CareDx’s burden of introducing evidence sufficient for a rational jury to find that consumers actually relied on or were deceived by Natera’s false claims in deciding to purchase Prospera instead of AlloSure.”

What about the success of the ad campaign? The evidence showed that (1) the comparative claims were a focus of Natera’s advertising campaign; (2) a “small factor” in Natera’s increase of sales was that the claims “pique[d] doctors’ interest[s]” in looking to the literature, and (3) Natera’s sales team was successful in converting “at least one AlloSure user[ ]” to Prospera. But that doesn’t show that consumers were actually confused. Neither did Natera’s willfulness (apparently, internal emails showing that its data folks raised concerns about the claims).

If you can infer bad intent from copying in trademark cases, and likely confusion from intent, why not here? Damage is explicitly an element in false advertising, and it should be but isn’t in trademark infringement, but that difference doesn’t itself require prohibiting an inference of damage from circumstantial evidence like the centrality of the false claim to an ad campaign.

The court also rejected consideration of CareDx’s corrective advertising costs, because although CareDx understandably worried about the false claims, it still didn’t show lost sales. [If the corrective advertising worked, how could it?]