Apple Loses First Round of Masimo Bid to Ban Watch Imports (2)

Certain models of the Apple Watch infringe one of five Masimo Corp. patents related to using light sensors to measure the amount of oxygen in the blood, a US International Trade Commission judge found in the first round of Masimo’s bid to block imports of Apple Inc.'s popular smartwatch.

The ITC had postponed the decision three times before Judge Monica Bhattacharyya issued her initial determination, announced in a notice Tuesday.

The accused products infringe at least one claim in each of three patents, the notice says, but most of those were mooted by Bhattacharyya’s findings that the infringed claims were invalid or that Masimo hadn’t satisfied the technical prong of the requirement that it prove there’s a domestic industry to protect.

She found a violation only as to two claims of Patent No. 10,945,648, which Bloomberg Law estimates will expire in August 2028.

“We respectfully disagree with today’s decision, and look forward to a full review by the Commission,” an Apple spokesperson said in a statement.

Masimo’s chief executive, Joe Kiani, said in a statement that the decision “should help restore fairness in the market” and “exposes Apple as a company that takes other companies’ innovations and repackages them.” He called the judge’s findings a “critical first step toward accountability.”

Bhattacharyya also upheld the validity of two other patents for which she found no violation by the Apple Watch, though she said Masimo failed to satisfy the economic prong of the domestic industry requirement as to one of those.

Her findings, which are confidential until both sides get a chance to redact confidential information, are subject to review by the full commission, which has the power to block imports of products that infringe US patents. The commission has set a target date of May 10 to complete the investigation.

Masimo launched the campaign, in which it accuses Apple of stealing Masimo’s technology, in June 2021, after a federal trial court case had been delayed for nearly two years by Apple’s challenges over the validity of the patents and disputes over access to information—tactics that irked Masimo’s chief executive.

Trade Secrets Trial Looms

Bloomberg Intelligence analyst Tamlin Bason, in a Wednesday note, said the ITC’s first-round decision “may not provide sufficient leverage for the medical device maker to sway Apple into a licensing agreement. We believe Apple may be able to design-around the infringed claims, thus reducing the risk of an import ban. Masimo’s best shot of a deal now hinges on a March trade secrets trial, assuming its claims survive summary judgment.”

The two patent claims that the ITC judge found Apple infringed, he said, “don’t go to the heart of technology to monitor oxygen levels in blood,” leaving Apple with “a strong chance of designing around the claims.”

Still, Bason pegged the odds at 60% that Masimo gets a license agreement with Apple for $50-$300 million in annual royalty revenue or a damages award in its California jury trial on trade secrets. He called the trial, set to begin March 28, “Masimo’s best vehicle for a positive outcome.”

A potential spoiler, Bason added, comes with Apple’s pending motion for summary judgment in the trade secrets case. A hearing is set for Feb. 6. He called Apple’s arguments “fairly robust” but said if Masimo’s claims survive, they “could generate settlement leverage.”

Last October, the Cupertino, Calif.-based tech giant sued Masimo twice, alleging in patent-infringement complaints that Masimo “hastily developed its W1 watch as part of a “nefarious potential strategy” to bump the Apple Watch from the market “and make way for Masimo’s own watch.” Masimo’s W1 launched Aug. 31.

In its statement on the ITC’s first-round decision, Apple also said Masimo’s device “copies Apple Watch and infringes on our intellectual property,” and that Masimo is “also trying to eliminate competition from the market.”

Masimo—an Irvine, Calif.-based maker of signal-processing technology for health-care monitors—responded in mid-December with counterclaims accusing Apple of obtaining its patents fraudulently, violating antitrust laws, and engaging in false advertising, deceptive trade practices, and unfair competition. It also alleged Apple infringed 10 of Masimo’s patents.

The counterclaims allege Apple used patented pulse oximetry technology invented by Masimo in the Series 6, 7, and 8 Apple Watch products, and the Apple Watch Ultra.

In November, a California federal judge ruled that a former Masimo engineer stole trade secrets related to Masimo’s pulse oximetry technology. The judge blocked US sales by True Wearables Inc.—a company launched by the engineer after a stint at Apple—of the Oxxiom device “in its current iteration that includes the trade secrets.”

Masimo is represented by Knobbe Martens Olson & Bear LLP. Apple is represented by Wilmer Cutler Pickering Hale & Dorr LLP.

The case is In re: Certain Light-Based Physiological Measurement Devices, USITC, Inv. No. 337-TA-1276, initial determination issued 1/10/23.