False advertising under Lanham Act § 43(a) requires, among other elements, proof of an injury as a result of the false statement, either by direct diversion of sales or by a loss of goodwill. See Lexmark Int'l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 133, 140 (2014) (requiring proof of an injury under the Lanham Act); Bimbo Bakeries USA, Inc. v. Sycamore, 29 F.4th 630, 644 (10th Cir. 2022); Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997); see also 15 U.S.C. § 1125(a). 

A court may presume injury when there is proof that the “defendant has falsely and materially inflated the value of its product (or deflated the value of the plaintiff's product)” and the “plaintiff and defendant are the only two significant participants in a market or submarket.” Vitamins Online, Inc. v. Heartwise, Inc., 71 F.4th 1222, 1240 (10th Cir. 2023) (the use of literally false advertisements would satisfy the first requirement for an injury). This presumption also may apply to a sparsely populated market even if more than two competitors exist, provided that the other participants are insignificant. Id. at 1240 & n.6. Otherwise, the court cannot assume that the plaintiff's lost sales would have gone to the defendant. Id. 

To determine the scope of the market, courts examine “cross-elasticity of demand,” which measures the substitutability of products. Vitamins Online, 71 F.4th at 1240. “A high cross-elasticity of demand indicates that products are substitutes; a low cross-elasticity of demand indicates that the products are not substitutes and, as a result, do not compete in the same market.” Id. (quoting Lenox MacLaren Surgical Corp. v. Medtronic, Inc., 762 F.3d 1114, 1120 (10th Cir. 2014)). 

In Kesters Merchandising Display International, Inc. v. SurfaceQuest, Inc., __ F.4th __, 2026 WL 35198 (10th Cir. Jan. 6, 2026), the Tenth Circuit considered the proof required to show injury on summary judgment. 

Here, SurfaceQuest allegedly marketed its products with photographs of Kesters's competing product. Both manufacture material for lightweight construction. Kesters sells a product called MicroLite, which is a lightweight, seamless material used in architectural products. SurfaceQuest, on the other hand, mainly sells architectural film that is applied on surfaces like MicroLite.  

Kesters and SurfaceQuest previously had jointly marketed MicroLite samples wrapped in SurfaceQuest film. Kesters supplied SurfaceQuest with Kesters's products, specification guides, and photographs. And SurfaceQuest then applied its film to Kesters's products. About two years later, SurfaceQuest decided to sell and market its own lightweight beam wrapped in SurfaceQuest film. SurfaceQuest's marketing efforts included advertisements using photographs of Kesters's MicroLite products.

In its motion for summary judgment, SurfaceQuest showed the existence of multiple competitors. Kesters did not respond with any argument or evidence about their insignificance, and was unable to establish a presumption of injury at the district court. On appeal, Kesters instead attempted ot rely on a declaration that was submitted with Kester's reply brief for its motion for summary judgment for false advertising, But that declaration had not been referenced in Kester's response to SurfaceQuest's motion for summary judgment of no false advertising. The Tenth Circuit affirmed that the district court appropriately decided SurfaceQuest's motion based on all of the evidence presented in connection with that motion which did not include that declaration. The declaration also was not properly part of the record because it was presented for the first time in a reply brief for another motion. See Lowther v. Child. Youth & Fam. Dep't, 101 F.4th 742, 759 (10th Cir. 2024) (“Our case law forbids the district court from relying on new arguments or materials to decide a summary judgment motion unless the opposing party is provided an opportunity to respond.” (quoting Geddes v. United Staffing All. Emp. Med. Plan, 469 F.3d 919, 928 (10th Cir. 2006))); see also Modaine v. Am. Drug Stores, Inc., 408 F. Supp. 2d 1169, 1203 (D. Kan. 2006) (“The Court will not consider new arguments in a party's reply brief.”). 

Furthermore, the Tenth Circuit noted in dicta that the declaration addressed only similarities between the products made by Kesters and SurfaceQuest—but not cross-elasticity of demand because these similarities did not necessarily affect the ability to substitute products. See Telecor Commc'ns, Inc. v. Sw Bell Tel. Co., 305 F.3d 1124, 1132 (10th Cir. 2002) (“Reasonable interchangeability does not depend upon product similarity”); see also Vitamins Online, 71 F.4th at 1241 (“multiple manufacturers will make up a relevant market, even if there are differences between the manufacturers' products”).  

The Tenth Circuit also held that Kesters failed to present evidence for a triable issue with respect to actual injury. 

     The Lanham Act protects against actual injuries in the form of lost profits. See [Lexmark, 572 U.S.] at 134 (concluding that the plaintiff's lost sales were cognizable under the Lanham Act). But Kesters must prove “a causal connection” between SurfaceQuest's false advertising and an actual injury. Vitamins Online, 71 F.4th at 1238; see also Lexmark Int'l, Inc., 572 U.S. at 133 (concluding that the plaintiff ordinarily must show injury “flowing directly from the deception wrought by the defendant's advertising”).

Kesters alleged that it had lost a bid to sell products to a store called Hy-Vee as a result of SurfaceQuest's false advertisements. But Kesters presented no evidence that SurfaceQuest had obtained the Hy-Vee sales that Kesters allegedly lost; that SurfaceQuest had shown its marketing materials to Hy-Vee; or that Hy-Vee had seen any of SurfaceQuest's marketing materials. 

Absent such evidence, the district court couldn't reasonably infer a causal connection between SurfaceQuest's false advertising and Kesters' loss of the bid.  

Accordingly, because the evidence on the record did not support the existence of an injury, the Tenth Circuit affirmed the grant of summary judgment to SurfaceQuest on Kesters's claim of false advertising.