Background
Eli Lilly manufactures Mounjaro and Zepbound, the only FDA-approved drugs containing the active ingredient tirzepatide, which is used to treat obesity and type 2 diabetes. When both drugs landed on the FDA’s drug shortage list, federal law permitted state-licensed pharmacies and physicians to compound tirzepatide—that is, to prepare custom versions of the drug—as a stopgap measure. The FDA removed tirzepatide from the shortage list in August 2024.
In June 2024, Eli Lilly sued Alderwood Surgical Center LLC and affiliated Seattle-area cosmetic surgery clinics (operating as Allure Esthetic, Gallery of Cosmetic Surgery, and Seattle Plastic Surgery), along with individual physician defendants. Lilly alleged the clinics used its Mounjaro and Zepbound trademarks to market compounded tirzepatide products, misleading consumers into believing they were purchasing genuine Lilly medications. The complaint asserted federal trademark infringement and false advertising claims under the Lanham Act, as well as a Washington state Consumer Protection Act claim.
In March 2025, the court partially granted the defendants’ motion to dismiss, tossing the state-law CPA claim but allowing the federal trademark and false advertising claims to proceed. The court specifically held that the Federal Food, Drug, and Cosmetic Act does not bar private trademark claims under the Lanham Act—a significant ruling for pharmaceutical trademark enforcement against compounders.
The Court’s Holding
After the federal claims survived dismissal, the parties reached a settlement and filed a joint motion asking the court to approve and enter a consent judgment with a permanent injunction. This was not the first attempt: an earlier proposed settlement in 2025 was also rejected after the judge found the parties had left the court “entirely in the dark” on the finer points of their deal.
On June 4, 2026, Judge Lauren King denied the renewed joint motion without prejudice. The court found the proposed consent decree was “overbroad” and that the accompanying permanent injunction was “even more sweeping” than the decree itself. While the specific language of the rejected injunction has not been publicly released in full, the court’s concern centered on the breadth of the restrictions the parties sought to impose through judicial imprimatur—restrictions that apparently went beyond what the underlying trademark claims could support.
By denying the motion without prejudice, the court left the door open for the parties to submit a narrower, more tailored proposed consent decree that aligns with the scope of the actual trademark dispute.
Key Takeaways
- Courts will scrutinize consent decrees in trademark cases. Even when both sides agree to settle, a federal court is not a rubber stamp. Judges have an independent obligation to ensure that consent judgments—particularly those with permanent injunctions—are proportionate to the claims actually litigated.
- Pharmaceutical companies cannot use trademark settlements to regulate compounding by proxy. The court’s rejection signals concern that the proposed injunction may have restricted lawful compounding activity beyond what trademark law alone would justify.
- Transparency matters. This is the second time this court rejected a proposed settlement in this case. The earlier rejection cited a lack of disclosure; this one cited overbreadth. Parties seeking consent judgments should present clear, well-defined terms with an obvious nexus to the proven or admitted violations.
Why It Matters
This ruling sits at the intersection of two high-stakes issues: the booming market for GLP-1 weight-loss drugs and the ongoing legal battle between Big Pharma and compounding pharmacies. Eli Lilly has filed multiple lawsuits nationwide to protect its Mounjaro and Zepbound brands, and many compounders argue these suits are designed to eliminate competition rather than protect consumers from confusion.
Judge King’s order sends a clear message that federal courts will not let private trademark settlements become a backdoor tool for restraining lawful competition. For compounders, the ruling is a reminder that courts are paying close attention to the scope of any restrictions imposed in these cases. For pharmaceutical companies, it underscores the need to draft consent decrees that are tightly tied to proven trademark harms—not broader competitive objectives.
Surfaced via Law360 IP.