One of my mentors at the first law firm where I worked said, “You’re not a grownup until you’ve lost one you should have won, and you’ve won one that you should have lost.” In CareDX Inc. v. Natera, Inc.,plaintiff biomedical company CareDx seems to have done both, first in the District of Delaware and then the Third Circuit.
Both companies produce tests that can detect whether a transplanted kidney is being rejected by the recipient. Each party had its own study regarding the effectiveness of its product, and Natera promoted in an extensive advertising campaign the alleged differences between the products’ metrics.
When CareDx caught wind of the claims Natera made in a multimedia marketing blitz to medical professionals, it sued for false advertising under the Lanham Act, the Delaware Deceptive Trade Practices Act, and Delaware common law prohibiting unfair competition. CareDx produced 10 specimens of advertising materials that, it claimed, made factual and statistical misrepresentations concerning the tests’ effectiveness in three key indicators that (essentially) measured accuracy, precision, and something that plots accuracy against precision.
After a jury found in favor of the plaintiff, it awarded $21.2 million in actual damages, and $23.7 million in punitive damages. Natera then moved for judgment as a matter of law on liability, arguing that the evidence did not permit a rational jury to find that the advertisements were literally false, or that there was actual deception and reliance.
The Third Circuit affirmed that the jury had reason to conclude that Natera’s advertising to medical professionals had been expressly, factually misleading. The jury heard testimony from two expert witnesses to conclude that the studies were not statistically comparable, but the defendant still used them to make claims of its product’s superiority. It did not help Natera’s defense that there were internal emails among employees saying the studies weren’t comparable and expressing misgivings about that, which indicated a certain level of bad faith. Indeed, the jury’s award of punitive damages was based on the defendant’s willfulness.
But there was a problem. The defendant may have intended to mislead consumers, but plaintiff didn’t have any evidence of consumer confusion. Instead, the plaintiff emphasized how much money the defendant spent on the multimedia advertising campaign. The plaintiff alleged that it lost sales because of the advertising campaign, but the court called that argument conclusory because CareDx didn’t show that any consumers were confused by the advertising. Absent that evidence, no damages were warranted.
The Third Circuit affirmed the district court, and CareDx managed to solidify the defeat it snatched from the jaws of victory.
It seems curious to me that this case made it all the way to trial without having better evidence of damages. I wonder if it was a matter of not managing the client’s expectations after a certain point: “Yes, there’s evidence of wrongdoing, but where’s the evidence of damages?” Maybe the moral of the story is that attorneys sometimes have to put their foot down and point out their clients’ claims, though righteous, are flawed as a matter of law.
