Earlier this year, the US International Trade Commission (ITC) concluded that Apple had violated two patents held by medical device maker Masimo. Consequently, the ITC announced an import ban on the Apple Watch Series 9 and Ultra 2, effective December 26th. Initially, skepticism prevailed as Apple often faces legal challenges, and such consequences are rare even after losing lawsuits.
However, this time seems different. Unless a Christmas miracle intervenes, experts indicate Apple’s challenge to evade the ban appears unlikely. Following allegations from medical technology firm Masimo, Apple announced on Monday its decision to discontinue the Series 9 and Ultra 2 versions of its popular watch. Despite Apple’s persistent denial of these claims, the affected watches will no longer be available for online purchase starting Thursday. They will also be withdrawn from retail stores on Christmas Eve.
Key Background
Masimo and Apple have been entangled in a protracted legal battle spanning several years concerning intellectual property related to its pulse oximeter. CEO Joe Kiani alleges that Apple poached its employees, along with proprietary information.
In a prior ruling in October, the U.S. International Trade Commission determined that specific Apple Watches breached Masimo’s patents pertaining to the blood oxygen feature, a technology integrated into most of Apple’s smartphone watches since 2020.
Masimo, a publicly traded company headquartered in Irvine, Calif., specializing in selling patient monitoring devices to hospitals, perceived Apple’s decision to halt watch sales as validation.
The commission enforced an import ban on the watches featuring the technology, originally scheduled to activate on December 26th, yet Apple took preemptive action before the deadline. Apple Watches already purchased with the blood oxygen feature remain unaffected by the directive.
Apple’s patent dispute has reached the White House
The commission, responsible for advising the White House and Congress on matters, including intellectual property disputes, operates under presidential oversight. Apple has contested the commission’s verdict and is urging the Biden administration to reverse it. The White House has until Christmas Day to decide.
“The decision to exclude certain foreign-made models of the Apple Watch demonstrates that even the world’s most powerful company must abide by the law,” a Masimo spokesperson said in a statement to NPR.
Gene Munster, a seasoned Apple analyst, expressed that removing the new watches from retail outlets during the peak of the holiday shopping season is ill-timed for the company. However, he anticipates that the impact on sales will be minimal, perhaps “fractional at most.”
Munster added, “The majority of those interested in purchasing a watch as a holiday present have likely already done so. The larger concern for me is, ‘How long will this situation persist?'”
The potential reversal of the commission’s decision by the White House, as suggested by Munster, appears to be Apple’s expectation. This could elucidate why Apple opted not to negotiate a licensing agreement with Masimo, allowing the dispute to prolong over several months.
Munster remarked, “Apple represents the pinnacle of U.S. innovation, and it’s likely they are banking on the Biden administration acknowledging this and supporting their efforts for a reversal. Apple tends to employ assertive strategies in negotiations with other companies, sometimes leading to more favorable deals, such as licensing agreements.”
An Apple spokesperson verified the sales halt but refrained from providing additional comments. As per court records, Masimo engaged in discussions with Apple back in 2013 regarding integrating the medical technology firm’s tools into Apple products. However, these negotiations fell through.
Later, Apple hired two Masimo executives and key engineers away from the company.
Masimo has claimed in legal filings that Apple poached the employees in order to illegally duplicate its technology. Apple has denied that it violated any Masimo patents, saying Apple consulted with several medical technology companies before coming up with its own version of the blood oxygen tool.
In May, the patent fight stumped a jury, which could not reach a unanimous verdict on the question of whether Apple stole the idea for its blood oxygen feature from Masimo.
While Masimo could not make its case to a jury, the trial did reveal that Apple discussed the idea of acquiring Masimo at one point before ultimately deciding against it. The ruling from the International Trade Commission, which is separate from the case that was before a jury, is being contested by Apple. The company has said it will “take all measures” to resume sales of the affected watches in the U.S.
Apple’s wearables, home, and accessory business, which includes the Apple Watch, AirPods earbuds and other products, brought in $8.28 billion in revenue during the third quarter of 2023, according to a company report.
