Background
Gilead Sciences manufactures and sells prescription drugs, including the HIV medication Biktarvy, in the United States and abroad. After a Maryland patient received Turkish-market Biktarvy through his employer’s self-funded health plan, Gilead investigated and found that Rx Valet, Advanced Pharmacy, Affordable Rx, and executive Gregory Santulli had arranged for hundreds of bottles of foreign-market Gilead drugs to be shipped to U.S. patients. Although the Turkish Biktarvy was chemically identical to the U.S. version and bore authentic Gilead marks, its labeling and patient information were in Turkish and omitted warnings, identifying information, and other materials accompanying the domestic product.
Gilead sued the four direct participants, along with third-party administrator Meritain Health and pharmacy benefit manager ProAct, under the Lanham Act. It alleged that the first group directly infringed Gilead’s trademarks by importing and distributing materially different foreign-market drugs and that Meritain and ProAct contributorily infringed by supplying data, referrals, claims processing, and payment services despite knowing or having reason to know of the infringement. The district court preliminarily enjoined all appellants from importing, advertising, selling, or facilitating the importation of products bearing specified Gilead marks.
The Court’s Holding
The Fourth Circuit affirmed the preliminary injunction. It held that Gilead was likely to establish direct trademark infringement because the foreign-market medications were not genuine goods for Lanham Act purposes. The imported products materially differed from their domestic counterparts in language, warnings, prescribing information, National Drug Code information, and regulatory disclosures. They also bypassed Gilead’s domestic quality controls for temperature monitoring, supply-chain traceability, recalls, and authorized distribution. Chemical identity and authentic marks did not eliminate those material differences, and the first-sale doctrine therefore did not bar Gilead’s claims.
The court also held that Gilead was likely to establish contributory infringement by Meritain and ProAct. Under Fourth Circuit precedent, a service provider may be liable if it continues supplying services to an identified direct infringer while knowing or having reason to know of the infringement; prior specific notice from the trademark owner is not required, and degree of control is not a separate element. The record supported findings that Meritain and ProAct knew or had reason to know that their services facilitated the importation of materially different Gilead drugs. The court further held that the Food, Drug, and Cosmetic Act did not preclude Gilead’s Lanham Act claims, declined to exercise pendent appellate jurisdiction over the denial of Santulli’s personal-jurisdiction motion, and deemed waived his separate preliminary-injunction argument concerning the applicable personal-jurisdiction standard.
Key Takeaways
- Authentic gray-market goods may still infringe trademarks when they materially differ from authorized domestic products or bypass the trademark owner’s legitimate quality-control system.
- For prescription drugs, differences in labeling, safety warnings, regulatory information, traceability, temperature monitoring, and recall coverage may be material even when the formulations are chemically identical.
- In the Fourth Circuit, contributory trademark liability for service providers follows Inwood’s inducement-or-knowledge test; it does not require prior notice from the trademark owner or proof of a separate degree-of-control element.
Why It Matters
The decision applies the gray-market material-differences doctrine in the Fourth Circuit and confirms that prescription drugs manufactured by the trademark owner can nevertheless be non-genuine under the Lanham Act when imported outside the owner’s authorized domestic labeling and quality-control systems.
It also clarifies the exposure of health-plan administrators, pharmacy benefit managers, and other service providers that knowingly facilitate international drug-sourcing programs. Providers cannot necessarily avoid contributory liability merely because the trademark owner did not first send a cease-and-desist notice or because the provider did not itself possess or dispense the infringing goods.