STORY UPDATED – Scroll down to read
In the matter of Masimo Corp. v. Apple, Inc….AND…Apple, Inc. v. Masimo Corp. we have a full-blown, overt litigation war raging between two determined combatants. It is a complex battle that has opened multiple fronts with multiple separate actions initiated by each of the parties in District Courts, the U.S. International Trade Commission, the Patent Trial and Appeal Board, the U.S. Customs and Border Protection, and the U.S. Court of Appeals for the Federal District. Almost every one of the myriad decisions by all of these entities is appealed to final disposition.
However, Friday, January 12, 2024, turns out to be an especially important day.
Learn about recent decisions in the legal battle between Masimo and Apple
STRATA-SMART SUMMARY –
In the complex legal battle between Masimo and Apple, a decisive development on January 12, 2024, suggests Apple may be capitulating. The U.S. Customs and Border Protection ruled that modified Apple Watches, without pulse oximetry functionality, could bypass the import ban. Apple’s reported redesign and potential firmware update seem indicative of a resolution. A letter submitted to the Appeals Court hints at Apple’s capitulation, potentially ending the prolonged conflict over Masimo’s pulse oximetry technology in Apple Watches. The risk of de-featuring a profitable product raises questions about Apple’s strategy in resolving the dispute.
The battle raging between Masimo and Apple is one of the most complicated and massive legal affairs I’ve followed. Each side has accused the other of many counts of patent infringement – with multiple claims asserted on multiple patents. Each of the parties has attacked the other by not only defending their respective patents but also by simultaneously attacking the other’s innovations as unpatentable with the Patent and Trademark office. They each filed claims of unfair trade practices with the United States International Trade Commission or in U.S. District Court.
A Dizzying Number of Issues Brought to Appeal
And each unfavorable ruling against a claim or a patent is appealed. There have been a dizzying number of issues brought to the U.S. Court of Appeals for the Federal District. It is truly challenging to keep it all sorted out. Often, when I hear of a ruling, I have to search in multiple online venues to figure out in which venue that matter was being decided (i.e. Was that the “underlying” issue that was decided, or an appeal of that issue?)
This battle has already run for years and there are still multiple issues pending in various venues to be decided. But Friday, January 12, 2024, is at least a red letter day…and perhaps it was a decisive day. But because various announcements conceal confidential information, it is hard to know for sure just what the facts are – but it is pretty easy to imagine what this solution may be.
A Brief Review of How We Got Here
First, a brief review of the background of this matter. I first learned of an interesting case back in 2022, when Masimo, a medical products manufacturer who came on my radar screen when it acquired audio powerhouse Sound United, sued a former employee for stealing its trade secrets. The stolen trade secrets revolved around Masimo’s pulse oximetry technology – a technology that accurately measures oxygen levels in the bloodstream non-invasively.
That employee had started another company called True Wearables and the judge in that case found for Masimo, saying the employee, Dr. Marcelo Lamego, had misappropriated Masimo technology to start his company. In learning more about this case, I discovered that this same employee had left Masimo first to go to work for Apple, where he helped them include pulse oximetry into certain Apple Watch products. It was only after he left Apple, that he started True Wearables – which was closed down as a result of his losing the lawsuit.
This Case Marked the Beginning of a Massive Battle Ahead
This was just the beginning of a conflagration between Masimo and Apple that has blown up to massive proportions. During this battle, we learned that Apple conducted a series of meetings with Masimo to learn more about their technology and then, rather than acquire the company, set about hiring dozens of top Masimo employees including its leading scientist and Chief Medical Officer.
Then Apple launched two models of their popular Apple Watch product – Series 9 and Ultra 2 – that now included pulse oximetry technology. Masimo sued and filed a complaint with the U.S. International Trade Commission (USITC) which ultimately agreed with Masimo, finding Apple infringed on its patents and banned the importation of Apple Watch in the United States starting this past Christmas.
Apple Complied and Began Pulling Watches From Its Webstore
In compliance with the ban, Apple began pulling Apple Watches off its website in the days leading up to Christmas, although retailers who had the product in inventory were allowed to continue to sell it. Apple then filed an emergency appeal with the U.S. Court of Appeals for the Federal Circuit, requesting – and winning – a temporary stay of the USITC ban.
As this drama over the ban was playing out, separately, on Friday, January 12th, Masimo learned that the Court of Appeals delivered judgments in its favor on two separate appeals filed by Apple of decisions by the Patent Trial and Appeal board that had affirmed that two key Masimo patents were indeed true innovations. Apple had alleged the patents should be invalidated as the inventions were obvious. The Court of Appeals agreed with the PTAB (and by extension, Masimo).
U.S. Customs and Border Protection Say Modified Watches Could Bypass the Ban
Also, we learned that on Friday, the U.S. Customs and Border Protection had determined that modified versions of Apple Watches submitted to it by the company could bypass the import ban as they did not infringe on Masimo patents. Apparently, the pulse oximetry technology had been removed.
On Monday of this week, Masimo – after consulting with Apple – submitted a letter to the Appeals Court judge informing him that a “supplemental authority” had emerged on the matter. The letter revealed that “the Exclusion Order Enforcement Branch of the U.S. Customs and Border Protection decided that Apple’s redesign falls outside the scope of the remedial orders in the ITC Investigation underlying Apple’s appeal.”
Apple Modifies Watch Models That ‘Definitively Do not Contain’ Masimo Technology
The letter goes on to add: “Apple explained ‘that its Redesigned Watch Products definitively (i) do not contain pulse oximetry functionality…'” I don’t know about you, but to me, this sounds like Apple is capitulating, pulling the parts out of the Watch that infringes on Masimo’s technology. Seemingly, this would mean the matter is over. But what about all of the existing inventory? The letter has more…
Curiously, the letter notes that, “Because Apple has maintained that certain information in the EOE proceeding is confidential, Masimo does not provide a copy of the decision with this letter.” Hmmmmm…what information did Apple share with the EOE that would be confidential?
Move Eliminates ‘Any Irreparable Harm Alleged by Apple’
The letter concludes by saying that, “All of the parties have discussed” the ruling’s relevance and that this new development “would eliminate any irreparable harm alleged by Apple.” That is an important phrase, as “irreparable harm” was the reason Apple asked the Appeals Court for an emergency stay of the ban on its Watch models.
So it sounds very much to me like we may have a cessation of hostilities surrounding Apple’s unpaid use of Masimo’s pulse oximetry technology in the Watch very soon. This could be the end.
Does This Letter Signify the End of the Conflict?
Here is the entire letter Masimo (in consultation with Apple) sent the Judge:
What About Existing Watch Models With Infringing Technology?
But, wait a minute, what about all of the existing inventory of Watch models that still contain the infringing technology? I believe the answer lies within that “confidential” information that Apple shared with the EOE branch of the Customs folks…and presumably Masimo.
I believe that Apple is going to implement a firmware update that will disable the pulse oximetry functions of the existing Watch inventory. So that means these Watch models will lose their ability to measure blood oxygen levels and will no longer infringe on Masimo patents. Then, all new models imported into the country won’t even have the pulse oximetry technology installed and Masimo is vindicated.
Haven’t We Seen This Movie Before?
But something feels familiar about this resolution. It sounds very much like the solution that Google implemented when Sonos had won an ITC decision which resulted in a Cease and Desist order by the USITC against Google importing smart speakers that infringed on Sonos patents. Instead of negotiating a royalty with Sonos, Google simply implemented a firmware update that disabled any feature that was based on the Sonos technology.
This shocked me as Google already had a ton of smart speakers in the field being enjoyed by users everywhere. Little did those end users know that when the firmware was updated…they were going to lose features.
Apple’s New Risk: De-featuring a Product It Needs to Sell More Of
Now, Apple is taking the same route – choosing to de-feature its popular Watch models at a time when the company was relying on the category for accelerated growth to help offset the decline in iPhone sales. It was Tim Cook himself who realized that health-tracking capabilities are the key feature in making Watches popular, and blood oxygen levels was a key part of that.
Unlike Google, which likely sells its smart speakers at little to no profit to drive adoption, Apple Watches are not cheap and are certainly profitable for the company. They generate billions of dollars in revenues for the company and it would seem risky to mess with the formula of what makes them successful.
Wouldn’t a Reasonable Royalty or License Make More Sense?
It would also seem as though a reasonable royalty of say a few dollars a unit would be easy enough to absorb – or even pass along to the consumer.
Is Apple biting off its nose to spite its face? No matter what, this resolution has got to be a bitter pill for Cook and Apple to swallow after having spent millions of dollars fighting Masimo for years now.
But it truly appears that capitulation is at hand…
Learn more about Apple by visiting apple.com.
See all that Masimo has to offer at masimo.com.
STORY UPDATED – 1/18/24
Just hours after this story was posted, the U.S. Court of Appeals for the Federal District issued an order denying Apple’s request for a stay of the U.S. International Trade Commission’s import & sale ban on the Series 9 and Ultra 2 Apple Watch models, pending appeal. This means that Apple must now halt sales of the Apple Watch.
This is no doubt a stunning development for Apple as it had hoped to be able to continue to sell the Watch models while it continued its appeal. In a prepared statement, Masimo CEO Joe Kiani had this to say about the development.
The Federal Circuit’s decision to lift the temporary stay is a victory for the integrity of the American patent system and the safety of people relying on pulse oximetry. It affirms that even the largest and most powerful companies must respect the intellectual rights of American inventors and must deal with the consequences when they are caught infringing others’ patents.Joe Kiani, Masimo Founder & CEO
However, the situation is not a total loss for Apple. While the stay was lifted, the appeal continues so Apple will still get its day in court.
Still, this twist has got to put Apple into a bit of a bind.