Apple reportedly paused sales of two models of its smartwatches in the U.S. as it looks to resolve a patent dispute with Masimo
(Nasdaq: MASI)
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Apple confirmed the decision in a statement to 9to5Mac.
The patent spat goes back as far as January 2020, centering around light-based pulse oximetry technology used by the watches. Masimo develops a number of technologies that use pulse oximetry, including its recently FDA-cleared W1 smartwatch.
A turning point in the long-running dispute came in October when the U.S. International Trade Commission (ITC) ruled in Masimo’s favor. The ITC recommended a limited exclusion order for infringing Apple Watches with light-based pulse oximetry functionality. It found that Apple violated U.S. laws by incorporating this patented technology in its products.
When the ITC issued its ruling, Joe Kiani, founder, chair, and CEO of Masimo, said: “This important determination is a strong validation of our efforts to hold Apple accountable for unlawfully misappropriating our patented technology.”
The exclusion goes into effect after a 60-day presidential review period. According to Reuters, it remains under review by President Joe Biden until Dec. 25. The report says Apple took its Series 9 and Ultra 2 watches off the market to remain in compliance if the exclusion remains in place. A ban would go into effect on Dec. 26, Reuters said. Apple still has its Watch 8 and SE models available in the U.S.
According to Reuters, Apple plans to pause sales on the affected models beginning on its website on Dec. 21 and at retail locations after Dec. 24. The outlet reports that Apple believes the ITC’s ruling was wrong and should be reversed. The tech giant plans to appeal.
The analysts’ view
BTIG analysts Marie Thibualt and Sam Eiber reiterated their belief that the ITC ruling represented a win for Masimo. They also note Apple’s intent to appeal on Dec. 26.
Previously, the analysts said Apple can appeal in the federal court circuit, a process that can take anywhere from 15-18 months. The exclusion order would remain in place during that period if Apple chose to appeal.
The analysts say they spoke to a patent attorney in May and believe the most likely outcome is that President Biden takes no action to prevent the ITC exclusion order from going into effect. They note the rarity of a vetoed exclusion order, as it only happened twice in the past 30 years.
“If the review period ends without any presidential action, then the orders would go into effect immediately,” they wrote. “We think there remains potential for [Masimo] to secure settlements, royalty payments, or other monetary-based agreements.”
A Masimo spokesperson issued the following statement:
“After a thorough multi-year legal investigation, the ITC found that Apple infringed certain of Masimo’s patented innovations for measuring blood oxygen. 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. The ITC’s expert judgment in this matter should be respected, protecting intellectual property rights and maintaining public trust in the United States’ patent system and encouraging US industry.”
More history behind the battle between Masimo and Apple
Masimo’s SET pulse oximetry technology uses include reducing blindness in neonatal ICU patients and monitoring post-surgical patients on opioids. It also offered remote patient monitoring for COVID-19.
In January 2020, Masimo accused Apple of poaching its employees and infringing 10 of its patents to improve the health monitoring functions of the Apple Watch. The court sought to determine whether Apple misused confidential information from Masimo related to the technology used to measure health data.
Earlier this year, a U.S. Administrative Law Judge in Washington, D.C. ruled in the company’s favor in a patent spat with Apple. The judge ruled that Apple violated Section 337 of the Tariff Act of 1930 by importing and selling certain Apple Watches in the U.S. These watches offered light-based pulse oximetry functionality and components. The judge also ruled that Apple did not violate four other patents belonging to Masimo.
In May, a federal judge in California declared a mistrial after jurors could not come to a unanimous verdict. At the time, analysts said the mistrial “suggests Masimo will most likely not come away victorious” in its battle with Apple.
The tides turned for Masimo with the October ITC decision, though, with analysts viewing it as a “significant win.”
A similar spat over IP went on between AliveCor and Apple. It ended in February when the final determination rule favoring AliveCor cleared presidential review.