Fourth Circuit: Foreign-Market Prescription Drugs Are “Non-Genuine” Gray-Market Goods When Labeling/Regulatory Disclosures and Distribution Quality Controls Materially Differ; Contributory Lanham Liability Does Not Require Prior Notice

1. Introduction

Parties and posture. Gilead Sciences, Inc. and Gilead Sciences Ireland UC IDA (collectively, “Gilead”) sued entities involved in an alternative funding program (“AFP”) that routed U.S. patients to foreign-sourced versions of Gilead-branded medicines, including the HIV drug Biktarvy. The “Quartet” defendants—Rx Valet, LLC, Advanced Pharmacy, LLC, Aqua Enterprise Inc. d/b/a Affordable RX Meds, and Gregory Santulli—were alleged to have imported and distributed foreign-market Gilead-branded drugs. Meritain Health, Inc. (a third-party administrator, “TPA”) and ProAct, Inc. (a carve-out pharmacy benefit manager, “PBM”) were alleged to be contributorily liable for facilitating the scheme.

Key facts. A Maryland patient (John Doe) expecting U.S.-market Biktarvy received a Turkish-market version—Turkish-language carton/bottle and Turkish patient materials, lacking U.S.-market warnings and disclosures. Gilead’s investigation uncovered broader shipments of foreign-market Gilead drugs to U.S. patients via the AFP pipeline: PBM “system edits” redirected claims to the AFP; Rx Valet coordinated; Advanced Pharmacy handled prescription routing; Affordable Rx arranged foreign pharmacy dispensing and shipment.

Issues on appeal. The Fourth Circuit reviewed an interlocutory order converting a TRO into a preliminary injunction under Winter v. Nat. Res. Def. Council, Inc., focusing on (i) likelihood of success on Lanham Act claims for direct infringement (Quartet) and contributory infringement (Meritain/ProAct), (ii) whether the FDCA precludes the Lanham claims, (iii) irreparable harm (including delay), and (iv) equities and public interest. Santulli also sought review of personal-jurisdiction rulings via pendent appellate jurisdiction.

2. Summary of the Opinion

The Fourth Circuit affirmed the preliminary injunction. It held that Gilead showed a likelihood of success because:

  • The imported foreign-market Gilead-branded drugs were not “genuine” for Lanham Act purposes due to (a) material differences (foreign-language labeling and missing U.S.-market warnings, NDC, and other disclosures) and (b) distribution outside Gilead’s domestic quality-control system (temperature monitoring, traceability/pedigree, and recall protocols).
  • The FDCA did not preclude the Lanham Act claims because liability turned on trademark “genuineness” and material differences/quality-control circumvention, not on adjudicating FDCA compliance.
  • Meritain and ProAct were likely contributorily liable under Inwood Lab'ys, Inc. v. Inves Lab'ys, Inc. because they continued supplying services to identified participants while knowing or having reason to know of the infringing importation; prior notice from the trademark owner is not a required element.

On irreparable harm, the court applied the Trademark Modernization Act presumption (15 U.S.C. § 1116(a)) and upheld the district court’s finding that Gilead’s investigative delay did not rebut harm. The balance of equities and public interest favored enjoining conduct likely prohibited by federal trademark law.

3. Analysis

3.1 Precedents Cited

A. Preliminary injunction standards and appellate review

  • Winter v. Nat. Res. Def. Council, Inc.: Supplies the four-factor test (likelihood of success, irreparable harm, balance of equities, public interest) that governed both the district court’s order and the Fourth Circuit’s review.
  • Leaders of a Beautiful Struggle v. Baltimore Police Dep't (en banc) and Mountain Valley Pipeline, LLC v. 6.56 Acres of Land, Owned by Sandra Townes Powell: Define abuse-of-discretion review, clear-error review for factual findings, and de novo review for legal conclusions. These cases framed the court’s refusal to reweigh competing evidence (e.g., temperature sensitivity disputes).
  • Salomon & Ludwin, LLC v. Winters, Jensen v. Md. Cannabis Admin., and Visual Scis., Inc. v. Integrated Commc'ns Inc.: Support the “likely” (not certain) success requirement and the “reasonable probability of ultimate success” phrasing the opinion contrasted with other standards (used in rejecting Santulli’s new-on-appeal personal-jurisdiction-standard argument).

B. Pendent appellate jurisdiction and waiver principles

  • Rux v. Republic of Sudan, Indus. Servs. Grp., Inc. v. Dobson, and Scott v. Fam. Dollar Stores, Inc.: Define the narrow scope of pendent appellate jurisdiction and “inextricably intertwined” issues. The court used these to refuse review of the personal-jurisdiction denial at this interlocutory stage.
  • In re Under Seal: Applied to hold Santulli waived the distinct argument that the district court had to find a “reasonable probability” of personal jurisdiction as a predicate to enjoining him, because he did not present it below.
  • Grayson v. Anderson and al-Suyid v. Hifter: Used to clarify that personal jurisdiction is the plaintiff’s burden when contested, but also a waivable defense (unlike subject-matter jurisdiction), undermining any claim that courts must sua sponte re-evaluate personal-jurisdiction standards at each procedural stage.

C. FDCA/Lanham Act interaction

  • POM Wonderful LLC v. Coca-Cola Co.: The opinion relied on its “complementary statutes” reasoning to support allowing Lanham Act claims even where labels are regulated, emphasizing different statutory purposes (consumer protection/public health vs. unfair competition) and the lack of express preclusion.
  • Sandoz Pharms. Corp. v. Richardson-Vicks, Inc.: Distinguished as a case where Lanham Act liability required resolving an FDA-regulatory classification question (active vs. inactive ingredient). The Fourth Circuit contrasted that with this case, where “material differences” did not require interpreting FDA regulations.
  • Mylan Laboratories, Inc. v. Matkari: Distinguished as rejecting a “too great a stretch” Lanham theory that mere marketing implies FDA approval. Gilead’s theory was not “implied FDA approval,” but “non-genuine gray-market goods” due to material differences and quality-control circumvention.

D. Gray-market goods, “genuineness,” material differences, and quality control

  • K Mart Corp. v. Cartier, Inc.: Provided the definition of gray market goods (foreign-manufactured goods bearing a valid U.S. trademark imported without the U.S. trademark holder’s consent). The court used this to situate the importation scheme as a gray-market problem.
  • Shell Oil Co. v. Com. Petroleum, Inc.: A Fourth Circuit anchor for the “quality-control” doctrine—goods can be non-genuine if distributed outside the trademark owner’s legitimate quality controls, even if physically authentic. The opinion analogized prescription-drug distribution risks to Shell’s distribution-contamination concerns, while rejecting a narrow reading that would confine the doctrine to contamination-only scenarios.
  • Societe Des Produits Nestle, S.A. v. Casa Helvetia, Inc., Iberia Foods Corp. v. Romeo, and Weil Ceramics & Glass, Inc. v. Dash: Used to articulate the “material-differences” doctrine: even authentic goods bearing a true mark can be non-genuine if they differ in consumer-relevant ways from goods authorized for domestic sale, creating likely confusion.
  • Zino Davidoff SA v. CVS Corp. and Brilliance Audio, Inc. v. Haights Cross Commc'ns, Inc.: Supported the low threshold for materiality (“slight difference” that consumers would likely deem relevant) and emphasized the fact- and market-specific nature of materiality.
  • Davidoff & Cie, S.A. v. PLD Int'l Corp.: Invoked both for “first sale/exhaustion” framing and the proposition that the first-sale doctrine does not bar claims when the goods are not “genuine” under the Lanham Act.
  • El Greco Leather Prods. Co. v. Shoe World, Inc.: Cited for the principle that a trademark owner’s right to control quality is a central Lanham Act protection; genuineness turns on compliance with the owner’s quality-control system, not solely on physical authenticity.
  • Am. Petroleum Inst. v. Cooper: Reinforced that the inquiry is whether goods meet the trademark owner’s quality-control requirements, not whether they are in fact inferior.
  • Matrix Essentials, Inc. v. Emporium Drug Mart, Inc.: Used to explain how bypassing quality controls can create “latent product defects” that confuse consumers because consumers cannot readily detect the defect.
  • Original Appalachian Artworks, Inc. v. Granada Electronics, Inc. and Lever Bros. Co. v. United States: Applied as packaging/labeling-difference exemplars—language and packaging differences can be material even when the underlying item is identical.
  • NEC Electronics v. CAL Circuit Abco: Distinguished; common corporate control over manufacturing did not cure material differences and quality-control bypass in this prescription-drug distribution context.

E. Contributory trademark infringement: knowledge, notice, and “control”

  • Inwood Lab'ys, Inc. v. Inves Lab'ys, Inc.: The controlling Supreme Court standard: contributory liability arises if a defendant intentionally induces infringement or continues to supply a product/service to one it knows or has reason to know is infringing.
  • Rosetta Stone Ltd. v. Google, Inc.: The Fourth Circuit’s key extension of Inwood to service providers and its admonition that general knowledge is insufficient; the defendant must supply services to “identified individuals” it knows or has reason to know are infringing. This precedent drove the court’s rejection of a “prior notice required” rule.
  • Sony Corp. of Am. v. Universal City Studios, Inc.: Cited via Rosetta Stone for the “identified individuals” formulation, used to confine liability to more than generalized awareness.
  • Tiffany (NJ) Inc. v. eBay Inc. and Luxottica Grp., S.p.A. v. Airport Mini Mall, LLC: Used to clarify that while specific notice can be evidence of knowledge, it is not a categorical requirement; and to support the role of willful blindness/constructive knowledge.
  • Al-Sabah v. World Bus. Lenders, LLC: Supplied the willful blindness definition (“suspicion aroused” but deliberate failure to inquire), reinforcing that “reason to know” can exist absent formal notice.
  • Ives Lab'ys, Inc. v. Darby Drug Co.: Quoted (and endorsed in Inwood) to illustrate that contributory liability attaches where continued supply facilitates infringement to a party known or reasonably suspected to be engaging in infringing substitution.
  • Hard Rock Cafe Licensing Corp. v. Concession Services, Inc., Fonovisa, Inc. v. Cherry Auction, Inc., Lockheed Martin Corp. v. Network Sols., Inc., and Perfect 10, Inc. v. Visa Int'l Serv. Ass'n: Discussed to reject (as a matter of Fourth Circuit doctrine) a separate “direct control and monitoring” element some Ninth Circuit cases apply to service providers. The court held Inwood’s inducement-or-knowledge test governs in this circuit; “control” is not an additional element.

F. Irreparable harm, delay, and related defenses

  • 15 U.S.C. § 1116(a) (Trademark Modernization Act of 2020): Provided a rebuttable presumption of irreparable harm upon a showing of likely success on the merits.
  • Lone Star Steakhouse & Saloon, Inc. v. Alpha of Va., Inc.: Reinforced the traditional view that trademark infringement regularly leads to irreparable injury (goodwill and reputation harms).
  • Tough Traveler, Ltd. v. Outbound Products: Used to evaluate whether delay undermines irreparable harm; the opinion highlighted Tough Traveler’s exception for good-faith investigation.
  • Ray Commc'ns, Inc. v. Clear Channel Commc'ns, Inc.: Referenced in connection with laches and prejudice, clarifying that prejudice analysis for laches did not control the irreparable-harm analysis on this record.

3.2 Legal Reasoning

A. The core trademark holding: chemically identical prescription drugs can still be “non-genuine”

The opinion’s most consequential move is its application (and practical adoption) of the dominant gray-market framework: a product bearing a valid trademark can still be infringing if it is not “genuine” in the Lanham sense. The court emphasized two independent routes to non-genuineness—either one sufficient:

  1. Material differences from the domestic, authorized version (Nestle; Iberia Foods; Zino Davidoff), evaluated under a “low threshold” of consumer relevance.
  2. Distribution outside legitimate quality controls (Shell Oil; El Greco), even without proof that any particular unit was defective.

Applying those doctrines to prescription drugs, the court treated differences in language, warnings, U.S. identifiers (NDC), and regulatory-facing disclosures as paradigmatically material—especially because prescription-drug consumption is safety- and instruction-sensitive, and because consumers expect the branded drug’s packaging and inserts to match domestic norms.

B. Quality-control reasoning tailored to pharmaceuticals

The court credited evidence that Gilead’s domestic supply chain includes temperature monitoring and investigation of excursions, traceability/pedigree, and recall mechanisms—controls that were absent or not enforceable within the importation pathway. Importantly, the court framed the injury as trademark-relevant confusion and goodwill harm: consumers encountering a Gilead mark reasonably assume Gilead-controlled handling, traceability, and recall coverage.

The court rejected two common defenses in gray-market drug disputes:

  • “The consumer can look up missing information online.” The court treated post hoc reconstruction as irrelevant to whether the product “matches what one reasonably expects when seeing Gilead’s mark.”
  • “We have comparable (or better) controls.” The opinion reiterated that trademark law protects the owner’s control over quality, not the defendant’s alternative quality regime (Shell Oil).

C. FDCA non-preclusion: trademark materiality is not FDCA enforcement

The court maintained a separation between (i) whether labeling differences violate FDCA rules and (ii) whether those differences are material to consumers and therefore trademark-relevant. Distinguishing Sandoz and Mylan Laboratories, it reasoned that Gilead’s theory did not require the court to decide what the FDCA means or whether the FDA would deem the products misbranded; it required only a comparison of product presentations and quality-control systems for Lanham Act “genuineness.”

D. Contributory liability for healthcare intermediaries: “reason to know” without formal notice

The opinion clarified that the “knowledge” prong under Inwood is satisfied by actual or constructive knowledge and does not impose a prerequisite of pre-suit cease-and-desist notice. The court used Rosetta Stone to require more than generalized awareness, but it found specific “reason to know” here through internal communications, prior experience processing international-sourcing invoices (including for Gilead drugs), marketing materials contradicting “we don’t support it” policies, and testimony acknowledging foreign labeling differences.

The court’s approach also implicitly lowers the practical burden for plaintiffs in service-provider cases where the ecosystem is contract- and data-driven: once evidence shows the intermediary understands what the program does, knows which programs/clients are involved, and continues to provide enabling services, contributory exposure becomes a live risk.

E. Rejection of “control” as a separate element (Fourth Circuit rule choice)

The court expressly declined to adopt the Ninth Circuit’s “direct control and monitoring” gloss associated with Lockheed Martin and Perfect 10. In the Fourth Circuit, the test remains Inwood: inducement or knowing (or reason-to-know) continued supply of products/services to identified infringers. This is doctrinally significant because it positions Fourth Circuit contributory-liability law as more textually faithful to Inwood and less protective of service intermediaries than “control”-based approaches.

F. Irreparable harm and delay

The court relied on the statutory presumption of irreparable harm (15 U.S.C. § 1116(a)) after finding likely success on the merits. It agreed that Gilead’s 10-month delay was attributable to good-faith investigation and reporting to the FDA, fitting within Tough Traveler’s investigation exception rather than signaling an absence of urgency.

3.3 Impact

  • For AFPs and self-funded plan design. The decision materially increases Lanham Act risk for AFP models that import foreign-market versions of branded drugs, even when chemically identical and non-counterfeit. “Savings” programs that depend on foreign-market packaging and non-U.S. distribution will face enhanced injunctive vulnerability.
  • For TPAs, PBMs, and claims administrators. The opinion signals that entities supplying eligibility data streams, routing edits, and payment/invoicing services can face contributory liability where internal knowledge and operational integration show “reason to know,” without requiring the brand owner to provide advance notice. Compliance programs will likely tighten around detecting and blocking international-sourcing claims.
  • For gray-market doctrine in the Fourth Circuit. Although framed at the preliminary-injunction stage, the opinion functionally aligns the Fourth Circuit with the overwhelming consensus recognizing material-differences and quality-control theories in gray-market disputes, and it applies them robustly to prescription drugs where labeling and supply-chain controls are central to consumer expectations.
  • FDCA/Lanham boundary. The court’s non-preclusion analysis encourages trademark plaintiffs to plead and prove “material differences” without turning the case into an FDCA enforcement proxy—an approach that may expand private policing of drug importation practices where the FDA declines enforcement.

4. Complex Concepts Simplified

Gray market goods
Authentic branded goods made for sale in one country but imported into another without the trademark owner’s permission. They are not necessarily counterfeit.
“Genuine” under the Lanham Act
Not merely “authentic.” A good can be physically genuine yet legally “non-genuine” if it materially differs from the authorized domestic product or bypasses the trademark owner’s legitimate quality controls, creating likely consumer confusion.
Material differences doctrine
If a foreign-market product differs in ways consumers would care about (even slightly), selling it under the same mark in the U.S. can confuse consumers about what they are getting.
Quality-control doctrine
Trademark law protects the brand owner’s right to control quality standards associated with its mark. If distribution occurs outside that system (temperature monitoring, traceability, recall systems), goods can be treated as non-genuine even without proof of defect.
First sale / exhaustion
After an authorized first sale, trademark rights are typically “exhausted” as to resales of the same genuine product. But exhaustion does not protect sales of non-genuine gray-market goods.
Contributory trademark infringement
Secondary liability: a party that does not itself apply the mark can still be liable if it intentionally induces infringement or continues supplying products/services to someone it knows or has reason to know is infringing.
Willful blindness
A form of constructive knowledge: suspicion is aroused, but the party deliberately avoids confirming infringement to remain ignorant.
Preliminary injunction (PI)
Temporary relief entered early in a case to prevent likely harm before final judgment, requiring satisfaction of the Winter factors.

5. Conclusion

The Fourth Circuit’s opinion affirms that, in the prescription-drug context, “authentic” foreign-market branded medicines can still be non-genuine for Lanham Act purposes when they (i) differ materially in labeling, warnings, identifiers, and accompanying disclosures, and/or (ii) reach patients outside the trademark owner’s domestic quality-control infrastructure. It further clarifies that contributory trademark infringement in this circuit turns on Inwood’s inducement-or-knowledge test—without an extra “control” element and without a requirement of pre-suit notice from the trademark owner—thereby expanding meaningful exposure for intermediaries that operationally enable gray-market distribution.