FDCA Does Not Preclude Lanham Act Gray‑Market Drug Claims; Contributory Infringement Knowledge Requires No Prior Notice

1. Introduction

Case: Gilead Sciences, Inc. v. ProAct, Inc. (consolidated interlocutory appeals)
Court: United States Court of Appeals for the Fourth Circuit
Opinion by: Judge Agee (joined by Judge Harris and Senior Judge Keenan)
Posture: Appeal from a preliminary injunction entered by the District of Maryland.

Gilead, a biopharmaceutical company and owner of U.S. trademarks used on prescription HIV medications (including Biktarvy), sued a set of entities involved in an “alternative funding program” (“AFP”) that routed U.S. patients away from domestic pharmacy channels and toward foreign-sourced, foreign-labeled versions of Gilead-branded drugs. A Maryland patient received Turkish-market Biktarvy (authentic tablets, but foreign packaging and documentation) through a chain involving an AFP marketer, affiliated pharmacy services, and a foreign dispensing pharmacy.

The defendants fell into two categories:

  • Direct actors (“the Quartet”): Rx Valet, LLC; Advanced Pharmacy, LLC; Aqua Enterprise Inc., d/b/a Affordable RX Meds; and Gregory Santulli—alleged to have imported and distributed foreign-market Gilead-branded drugs.
  • Intermediaries: Meritain Health, Inc. (TPA) and ProAct, Inc. (carve-out PBM)—alleged to have contributorily infringed by supplying data streams, claim edits, and payment processing that enabled the importation scheme.

The central issues were (i) whether the importation and distribution of authentic-but-foreign-market prescription drugs likely infringed Gilead’s trademarks under the Lanham Act (particularly through the “material differences” and “quality control” doctrines), (ii) whether the FDCA precluded such Lanham Act claims, and (iii) what level of knowledge is required to hold service providers liable for contributory trademark infringement.

2. Summary of the Opinion

The Fourth Circuit affirmed the preliminary injunction barring defendants from importing, advertising, selling, or facilitating the sale of imported Gilead-branded medications in the United States. Key holdings:

  • FDCA preclusion rejected: Gilead’s Lanham Act theory rested on material differences and quality-control circumvention—not on proving FDCA violations—so the FDCA did not bar the claims.
  • Non-genuine gray-market drugs: Foreign-market, authentic Gilead-branded drugs were likely not “genuine” for Lanham Act purposes because they (a) were materially different (labels, warnings, patient info, NDC, “Rx only,” etc.) and (b) bypassed Gilead’s domestic quality-control system (temperature monitoring, traceability/pedigree, recall integration, closed distribution).
  • Contributory infringement standard: Under Inwood Lab'ys, Inc. v. Inves Lab'ys, Inc. and Fourth Circuit law, prior notice by the trademark holder is not required; liability can rest on knowing or having reason to know (including willful blindness) that identified counterparties are infringing.
  • No independent “control” element adopted: The court declined to graft the Ninth Circuit’s “direct control and monitoring” gloss onto the Inwood test, relying instead on Rosetta Stone Ltd. v. Google, Inc.
  • Irreparable harm: The Trademark Modernization Act presumption applied; Gilead’s investigatory and FDA-reporting delay did not rebut it.

3. Analysis

3.1. Precedents Cited

A. Preliminary injunction framework

  • Winter v. Nat. Res. Def. Council, Inc. — supplied the four-factor preliminary injunction test (likelihood of success, irreparable harm, balance of equities, public interest).
  • Leaders of a Beautiful Struggle v. Baltimore Police Dep't and Mountain Valley Pipeline, LLC v. 6.56 Acres of Land, Owned by Sandra Townes Powell — defined the standard of review (abuse of discretion; clear error for facts; de novo for legal conclusions) and cautioned appellate courts against reweighing plausible factfinding.
  • Visual Scis., Inc. v. Integrated Commc'ns Inc. and Jensen v. Md. Cannabis Admin. — articulated likelihood-of-success phrasing (“reasonable probability” / “likely to succeed”).

B. FDCA and Lanham Act interaction

  • POM Wonderful LLC v. Coca-Cola Co. — central to rejecting implied preclusion; emphasized the statutes “complement each other” and that Lanham Act claims may proceed even in FDA-regulated labeling contexts when the theory does not require private enforcement of the FDCA.
  • Mylan Laboratories, Inc. v. Matkari — used to distinguish impermissible Lanham Act theories premised on an implied representation of “FDA approval” without an actual statement. The court found Gilead’s claim was not an FDA-approval-implied-advertising theory but a material-differences/quality-control trademark theory.
  • Sandoz Pharms. Corp. v. Richardson-Vicks, Inc. — discussed as an example where Lanham Act adjudication would have required FDA-regulatory interpretation; distinguished because Gilead did not need to prove FDCA noncompliance to show infringement.

C. Gray market goods, “genuineness,” and the first sale doctrine

  • K Mart Corp. v. Cartier, Inc. — provided the gray market definition: foreign-manufactured goods bearing a valid U.S. trademark imported without trademark-holder consent.
  • Shell Oil Co. v. Com. Petroleum, Inc. — Fourth Circuit anchor for the quality-control doctrine: goods distributed outside the trademark owner’s legitimate quality controls are not “genuine,” even if physically authentic.
  • Societe Des Produits Nestle, S.A. v. Casa Helvetia, Inc. — invoked for the “bundle of characteristics” concept and the material-differences doctrine.
  • Iberia Foods Corp. v. Romeo and Weil Ceramics & Glass, Inc. v. Dash — cited for the idea that material differences create consumer confusion in gray-market scenarios.
  • Zino Davidoff SA v. CVS Corp. and Brilliance Audio, Inc. v. Haights Cross Commc'ns, Inc. — supported a “low threshold” for materiality and the market-specific, fact-intensive nature of the inquiry.
  • Original Appalachian Artworks, Inc. v. Granada Electronics, Inc. and Lever Bros. Co. v. United States — illustrated that non-physical differences (language, packaging, documentation) can be material.
  • Davidoff & Cie, S.A. v. PLD Int'l Corp. — tied the first sale doctrine to genuineness; if goods are not genuine, “exhaustion” does not bar claims.
  • El Greco Leather Prods. Co. v. Shoe World, Inc. — reinforced that trademark owners have a key Lanham Act interest in controlling quality standards associated with the mark.
  • Matrix Essentials, Inc. v. Emporium Drug Mart, Inc. — used to frame the “latent defect” rationale: consumers may not detect quality-control failures even if the product appears authentic.
  • NEC Electronics v. CAL Circuit Abco — distinguished; common corporate control over manufacturing did not eliminate material differences or quality-control bypass in this case.

D. Contributory trademark infringement

  • Inwood Lab'ys, Inc. v. Inves Lab'ys, Inc. — controlling standard: liability for intentionally inducing infringement or continuing to supply products/services to one known or reasonably suspected (“has reason to know”) to be infringing.
  • Rosetta Stone Ltd. v. Google, Inc. — Fourth Circuit application to service providers; emphasized the need for more than generalized knowledge, but did not impose a “notice” prerequisite.
  • Sony Corp. of Am. v. Universal City Studios, Inc. — cited (via Rosetta Stone) for “identified individuals” framing: knowledge must connect to specific actors, not just a general awareness of infringement on a platform.
  • Tiffany (NJ) Inc. v. eBay Inc. — addressed and limited: the court read it as requiring particularized knowledge, not formal notice by the trademark owner.
  • Luxottica Grp., S.p.A. v. Airport Mini Mall, LLC — supported the “consensus” that willful blindness can establish constructive knowledge.
  • Hard Rock Cafe Licensing Corp. v. Concession Services, Inc. and Fonovisa, Inc. v. Cherry Auction, Inc. — discussed as flea-market contributory infringement cases.
  • Lockheed Martin Corp. v. Network Sols., Inc. and Perfect 10, Inc. v. Visa Int'l Serv. Ass'n — discussed as Ninth Circuit authorities adding a “direct control and monitoring” gloss; the Fourth Circuit declined to adopt that as a separate element.

E. Irreparable harm and delay

  • 15 U.S.C. § 1116(a) (Trademark Modernization Act of 2020) — provided a rebuttable presumption of irreparable harm upon a likelihood of success.
  • Lone Star Steakhouse & Saloon, Inc. v. Alpha of Va., Inc. — noted trademark infringement typically produces irreparable injury.
  • Tough Traveler, Ltd. v. Outbound Products — delay can undercut irreparable harm, but investigative delay in good faith does not.

F. Procedural waiver / pendent appellate jurisdiction

  • Rux v. Republic of Sudan, Indus. Servs. Grp., Inc. v. Dobson, and Scott v. Fam. Dollar Stores, Inc. — limited pendent appellate jurisdiction over non-appealable orders.
  • In re Under Seal — supported waiver by failure to raise an argument below.
  • Grayson v. Anderson and al-Suyid v. Hifter — personal jurisdiction burdens at each stage, but also that personal jurisdiction is waivable (unlike subject-matter jurisdiction).

3.2. Legal Reasoning

A. Why the FDCA did not preclude the Lanham Act claims

The court separated (1) proving trademark infringement from (2) enforcing FDCA labeling rules. Gilead’s infringement theory turned on whether imported foreign-market drugs were “non-genuine” for trademark purposes because of material differences and quality-control bypass. That analysis required comparing the domestic product experience (labeling language; NDC; “Rx only”; boxed warnings; FDA statements; patient information; recall/traceability systems; temperature monitoring) with what patients actually received—without needing a judicial determination that the imported labels violated FDCA regulations.

The court therefore treated POM Wonderful LLC v. Coca-Cola Co. as the governing principle: parallel FDA regulation does not categorically displace the Lanham Act. Mylan Laboratories, Inc. v. Matkari was distinguished because Gilead was not alleging an implied “FDA-approved” representation merely from marketing; it was alleging confusion arising from the mismatch between what the marks signify in the U.S. market and what consumers received.

B. “Authentic” does not mean “genuine” in gray-market drug cases

The court emphasized that Lanham Act “genuineness” is consumer-facing and expectation-driven. Even if the tablets are chemically identical and bear legitimate, non-counterfeit marks, they can still be non-genuine if they (i) materially differ from U.S.-authorized versions or (ii) reach consumers outside the trademark owner’s legitimate quality controls.

(i) Material differences

Applying a low materiality threshold (consistent with Zino Davidoff SA v. CVS Corp.), the court found the differences in language, omissions of U.S. identifiers (including the NDC), and missing U.S.-market warnings/instructions were plainly relevant to consumers—particularly in the prescription-drug context where labels and inserts carry safety and usage information. The court treated prior gray-market precedents (e.g., Societe Des Produits Nestle, S.A. v. Casa Helvetia, Inc.; Original Appalachian Artworks, Inc. v. Granada Electronics, Inc.; Lever Bros. Co. v. United States) as establishing that packaging, language, and accompanying documentation can be materially different even when the underlying product is physically the same.

(ii) Quality-control bypass

Relying heavily on Shell Oil Co. v. Com. Petroleum, Inc. and quality-control principles (also reflected in El Greco Leather Prods. Co. v. Shoe World, Inc.), the court credited evidence that Gilead’s U.S. distribution involves temperature monitoring, “quality event” investigations, pedigree/traceability, recall integration, and a closed authorized distribution network—none of which applied to the imported foreign-market shipments because Gilead was unaware of and did not control them. The court rejected the defense contention that it should focus only on whether the product was in fact harmed; the Lanham Act protects the trademark owner’s right to set and enforce quality systems associated with the mark.

C. Contributory infringement: knowledge without a “notice” prerequisite

The opinion’s most durable doctrinal move is its refusal to convert “knowledge” into a formal “cease-and-desist notice” requirement for contributory liability. Under Inwood Lab'ys, Inc. v. Inves Lab'ys, Inc., a party is liable if it continues supplying goods or services to an actor it “knows or has reason to know” is infringing. The court read Rosetta Stone Ltd. v. Google, Inc. and Tiffany (NJ) Inc. v. eBay Inc. as requiring particularized knowledge (not generalized awareness), but not requiring that knowledge to come only from trademark-holder notification. It further reinforced that constructive knowledge can be shown through willful blindness (supported by Luxottica Grp., S.p.A. v. Airport Mini Mall, LLC).

On the facts, the court found both intermediaries had ample reason to know:

  • Meritain: internal communications acknowledging invoices for “internationally sourced meds,” repeated instances of processing payment for imported drugs despite a stated policy, marketing suggesting support for international sourcing, and its own warnings that imported prescriptions lack key U.S.-market information (including NDC).
  • ProAct: programming “system edits” to direct patients to international sourcing programs; processing and paying claims for internationally sourced Gilead drugs; leadership testimony acknowledging foreign labeling and inserts; and knowledge stemming from prior FDA warning-letter materials regarding AFP drug differences and risks.

D. No freestanding “control” element in the Fourth Circuit’s contributory test

The court declined to adopt an additional requirement—drawn from Lockheed Martin Corp. v. Network Sols., Inc. and Perfect 10, Inc. v. Visa Int'l Serv. Ass'n—that service providers must exercise “direct control and monitoring” over the “instrumentality” of infringement. The Fourth Circuit instead adhered to Inwood as applied in Rosetta Stone: inducement or knowledge/reason-to-know while continuing to supply services. (The court also noted that even if “control” were required, the facts would satisfy it because the intermediaries could steer patients, provide data, and process payment—mechanisms capable of stopping the challenged conduct.)

E. Irreparable harm, delay, and the TMA presumption

Once likelihood of success was shown, 15 U.S.C. § 1116(a) supplied a rebuttable presumption of irreparable harm. The defendants’ main rebuttal—Gilead’s 10-month delay—failed because the district court found the period was used for good-faith investigation and FDA reporting, consistent with the investigative-delay principle recognized in Tough Traveler, Ltd. v. Outbound Products.

3.3. Impact

A. Gray-market prescription drugs: trademark risk independent of chemical equivalence

The decision strengthens the ability of pharmaceutical trademark owners to challenge AFP-driven importation of foreign-market “authentic” drugs under the Lanham Act. By treating differences in labeling language, safety warnings, identifiers (NDC), patient information, and U.S.-specific quality systems as material, the opinion makes clear that “chemically identical” is not a safe harbor for parallel importers in the prescription-drug context.

B. Expanded practical exposure for TPAs/PBMs and other healthcare intermediaries

By confirming that contributory infringement does not require prior notice and rejecting an added “control” element, the opinion increases potential exposure for service providers who (1) route patients to sources, (2) provide eligibility/data feeds enabling fulfillment, or (3) pay invoices for fulfillment, when they know or have reason to know the program involves non-genuine gray-market goods. The evidentiary discussion signals that internal compliance contradictions, marketing materials, and general industry knowledge can support “reason to know” findings—especially when tied to identified vendors and claims.

C. Litigation and injunction practice

The court reinforced that investigative delay does not necessarily defeat irreparable harm and that the Trademark Modernization Act presumption carries significant weight. It also highlights careful preservation: Santulli’s failure to argue a heightened preliminary-injunction-stage personal jurisdiction probability standard below resulted in waiver of that argument on appeal.

4. Complex Concepts Simplified

  • Gray market goods: genuine-brand goods made for sale abroad but imported into the U.S. without the U.S. trademark holder’s consent.
  • “Genuine” (Lanham Act sense): not merely “not counterfeit.” A product can be authentic but still “non-genuine” if it materially differs from the U.S. version or bypasses the trademark owner’s quality-control system.
  • Material differences doctrine: even small differences that consumers would care about (language, labeling, warnings, identifiers, packaging, documentation) can make gray-market goods infringing because they create confusion about what the trademark represents.
  • Quality-control doctrine: trademark law protects the owner’s right to control the quality standards and distribution conditions associated with its mark; goods distributed outside those standards can be treated as non-genuine.
  • First sale/exhaustion: after an authorized first sale, resale is often allowed—but not when what is being sold is “non-genuine” for trademark purposes.
  • Contributory trademark infringement: secondary liability for those who enable infringement—either by inducing it or by continuing to supply products/services to someone they know or have reason to know is infringing.
  • Willful blindness: a form of constructive knowledge—suspecting wrongdoing but deliberately avoiding confirmation.
  • Trademark Modernization Act presumption: if a plaintiff is likely to win on the merits, courts presume irreparable harm (defendants can try to rebut it).

5. Conclusion

The Fourth Circuit’s affirmance in Gilead Sciences, Inc. v. ProAct, Inc. materially clarifies trademark doctrine at the intersection of prescription-drug importation and modern benefits administration. The court held that the FDCA does not bar Lanham Act claims where infringement turns on gray-market “non-genuineness” (material differences and quality-control bypass), not on proving FDCA violations. It further strengthened contributory infringement enforcement by rejecting a prior-notice prerequisite and declining to add a freestanding “control” element for service providers, while applying the Trademark Modernization Act’s irreparable-harm presumption robustly. The likely downstream effect is heightened compliance pressure on AFPs, PBMs, TPAs, and related intermediaries whose operational choices can “facilitate” gray-market distribution in ways trademark law will treat as actionable.