Masimo Corporation (NASDAQ: MASI) scored a big win Thursday in its ongoing battles with Apple, Inc. when the United States International Trade Commission (USITC or ITC) sided largely with Masimo and issued a Limited Exclusion Order and a Cease and Desist Order against certain Apple Watch models that infringe on select Masimo patents. This exclusion order bans the import of those models that incorporate Masimo’s patented light-based pulse oximetry technology in violation of U.S. trade laws.
See more on Masimo’s stunning ITC victory over Apple
Masimo is justifiably crowing over a huge win for the company that has been involved in a long and truly ugly patent battle with Apple. The official announcement from Masimo on the ITC full commission’s decision noted in a subheading, “Decision Holds World’s Largest Company Accountable for Its Patent Infringement.”
It is very much like a David and Goliath story and I can affirm many of the court battles between the two companies have been positively vicious. Perhaps there’s no better example than the case heard before District Court Judge Selna in which Masimo showed how Apple broke off partnership discussions with Masimo and then proceeded to hire away many of their employees to pursue adding pulse oximetry into Apple Watch on their own.
Puts More Wind in Masimo’s Sails
It would later come out that Apple had hired a few dozen of Masimo employees. Unfortunately, that trial ended in a mistrial with Masimo vowing to bring it again.
This win at the ITC is likely to put some more wind in Masimo’s sails as their patent actions against Apple in various courts continue. Not only in court, but the two are battling in actions before the Patent Trial and Appeal Board as well.
ITC Found Apple Violated Multiple Claims Against Two Patents
In a nutshell, the ITC determined “that Apple has violated section 337 [of the Tariff Act of 1930] as to claims 22 and 28 of the ‘502 patent and claims 12, 24, and 30 of the ‘648 patent.” It wasn’t a total win, Masimo had alleged infringement of some of its other patents as well. But I’m sure they’ll be happy with this win because with it the Commission has taken decisive action.
The Commission has determined that the appropriate form of relief is an LEO [Limited Exclusion Order] prohibiting (1) the unlicensed entry of infringing wearable electronic devices with light-based pulse oximetry functionality and components thereof manufactured by or on behalf of Apple or any of its affiliated companies, parents, subsidiaries, or other related business entities, or its successors or assigns. The Commission has also determined to issue a CDO [Cease and Desist Order]against Apple.From Document: NOTICE OF THE COMMISSION’S FINAL DETERMINATION FINDING A VIOLATION OF SECTION 337; ISSUANCE OF A LIMITED EXCLUSION ORDER AND A CEASE AND DESIST ORDER; TERMINATION OF THE INVESTIGATION
ITC’s Two Very Powerful Tools
Once the ITC has determined that infringing products are being imported into the United States in violation of U.S. Trade Laws, it has two very powerful tools at its disposal to remedy the situation – a Limited Exclusion Order (LEO) and a General Exclusion Order (GEO). An LEO prohibits the importing of infringing products by a specific one or more entities – in this case, Apple. A GEO would be a total ban of any such item from any source entering the U.S.
Today’s ruling by the USITC sends a powerful message that even the world’s largest company is not above the law. This important determination is a strong validation of our efforts to hold Apple accountable for unlawfully misappropriating our patented technology.Joe Kiani, Masimo Founder, Chairman, and CEO
A Cease and Desist Order Halts Sales of Existing Inventory
As I said, the LEO blocks the importation of any Apple Watch that uses light-based pulse oximetry functionality that infringes on Masimo’s patents. That will stop any more infringing devices from coming into the country – but what about infringing products already here? During the case at the ITC, Apple had to reveal the likely sizable amount of inventory they held of the infringing Apple Watch models.
For this reason, the Commission also decided to issue a Cease and Desist Order (CDO). A CDO prevents Apple from offering this existing inventory for sale, preventing any further distribution of the infringing products.
Goes for Presidential Review
With the Commission’s finding, this investigation is over and has been terminated. However, the decision goes for presidential review. Yes, that’s right, the U.S. president has an opportunity to review and accept or countermand the Commission’s final determination. He has 60 days to review the matter and make his decision. After this presidential review period ends, the LEO and CDO go into effect.
During the ITC investigation into this matter, the Commission sought input from the public and dozens of entities participated. According to the announcement from Masimo, “Comments from two dozen academic institutions, leading antitrust and intellectual property scholars, physicians, investors, nonprofits, and members of Congress were filed in support of the public’s interest in the exclusion order.”
Public Comment Decries ‘Apple’s Egregious Abuse of Market Power’
One such comment came from the Consumer Federation of America, which stated, “There is no greater offense to both the antitrust and intellectual property law than when a dominant firm infringes the patent of a smaller rival, who is an actual or potential competitor. In this case, as in the other cases involving Apple’s egregious abuse of market power, the harms far outweigh the benefit[s]. In fact, because competition will swiftly replace any services or products that Apple is no longer able to deliver because of the remedy, there will be little harm and a great deal of benefit for consumers and the economy.”