Apple Inc. (NASDAQ: AAPL) announced that this week it was preemptively removing certain models of its Apple Watch line from its online store on Thursday, and from its physical retail stores by December 24th. The products affected by this action are the Series 9 and Ultra 2 Watch models which include pulse oximetry technology that the U.S. International Trade Commission (ITC) determined infringed on patents held by Masimo Corp. (NASDAQ: MASI).
See more on Apple being forced to pull Watch models off the shelf
Strata-gee readers first learned about this impending ban on the sale of Apple Watches from a report back in October, which noted the impactful decision by the ITC – a stunning victory by the smaller and scrappier Masimo in its battle with the largest corporation in the world. By way of comparison, consider the fact that Masimo is around a $2 billion revenue company (fiscal 2022), while Apple – at almost 200 times larger – is a $394 billion dollar revenue company (fiscal 2022). Apple carries a lot of clout, and they are not afraid to throw it around.
So for Masimo, winning that ITC decision had to be particularly sweet. However, Masimo CEO Joe Kiani has said that so far Apple has made no offer to pay any kind of royalty to Masimo in order to keep selling their Watch models. He says he would be open to such discussions.
Apple is Pulling Watch From Its Website & Stores Earlier Than Necessary
Interestingly, Apple’s move was actually anticipatory. After the ITC made its initial finding, then initial decision, then final decision, the matter is submitted to the White House for presidential review. The Biden administration has the power to reverse or veto ITC decisions on any products it deems as strategically important.
It is unusual for a President to overrule the ITC but it has happened. Most recently, President Obama vetoed a ban on Apple iPhones and iPads resulting from a dispute with Samsung. Biden has until December 25 to make his decision. After that time, the ITC decision is final.
Not All Models are Banned, But Two of Its Most Popular Series Are
Apple could have waited a few days longer, but it either knows something we don’t know or is simply preparing for what it may assess at this point as the inevitable. Various news media reached out to the White House on the matter, but it declined to comment.
It’s worthwhile to point out that the ITC ban is not on all Apple Watches, only those containing Masimo’s pulse oximetry technology. The problem for Apple is that the Watch models that are banned are their step-up, higher-end, more fully featured, and more profitable models…which contain the infringing technology.
Originally Planned to Push Watch to Offset iPhone Sales Declines
Another problem for Apple is that the company has suffered four consecutive quarters of revenue declines and has publicly admitted iPhone sales are off. To counter this segment’s decline, Apple management had targeted their “wearables” category – which includes the Watch – for a bigger push to recoup the lost iPhone revenues. Oops!
Apple says that it disagrees with the ITC decision which it believes is erroneous and it intends to appeal the ruling to the Federal Circuit Court. It hopes to get the decision reversed there.
Bloomberg News is also reporting that Apple is working on technical and legal workarounds in order to protect its $17 billion Watch business.
Apple is Fighting Back – Has 13 Masimo Patents Invalidated
Apple is also fighting back on other fronts. It has sued Masimo, whom it accuses of patent infringement, saying Masimo’s new smartwatch models infringe on several of Apple’s patents. I recently reported that the company has had some success slapping Masimo back, including recently getting 13 Masimo patents invalidated by the Patent Trial and Appeal Board (PTAB) – a decision that Masimo appealed to the Federal Circuit Court. Apple won again when the Federal Circuit Court affirmed the decision by the PTAB to invalidate the Masimo patents.
The pitched battle between these two companies continues on unabated.
Learn more about Apple’s Watch line by visiting apple.com.
See all that Masimo has to offer at masimo.com.