Apple Watch Import Ban Work-Around Suit Tests Customs’ IP Role

The seizure of five Apple Watches at the Port of Chicago in July set off a chain of events that escalated to US Customs and Border Protection headquarters in Washington—and to a lawsuit that could reshape the agency’s role in patent fights at the border.

That interdiction led to an Aug. 1 internal advice ruling from CBP headquarters clearing Apple Inc.’s work-around of an import ban handed down by the US International Trade Commission after medical-device maker Masimo Corp. in late 2023 convinced the agency a blood-oxygen feature infringed its patents.

Masimo said in a lawsuit filed this week it only learned of the ruling two weeks after its issuance when Apple announced that software updates would restore the pulse-oximetry feature for US Apple Watch owners by shifting calculations to paired iPhones rather than performing them on the watch itself. CBP’s process was procedurally deficient and unlawfully tilted in Apple’s favor, Masimo said.

At the center of the case is whether CBP went too far and undermined the ITC’s role. The ITC issues exclusion orders that block infringing imports and CBP enforces those orders at the border. Masimo says the agency crossed a legal line by effectively deciding a patent dispute when it cleared Apple’s redesign without giving the smaller company notice and the chance to participate.

Moreover, Masimo argues, CBP wrongly allowed the imports while Apple’s work-around still infringes under the doctrine of equivalents, which covers modifications that are “insubstantially different” from what the patent claims.

The case highlights a structural gap in CBP’s authority, said Bert C. Reiser, a partner at Cleary Gottlieb Steen & Hamilton LLP who represents clients in patent and trade disputes. The agency can decide whether a redesigned product directly infringes a patent, but it can’t weigh questions of indirect infringement not addressed in the underlying trade case—such as when a device might contribute to infringement only once paired with another product.

“Customs doesn’t have the authority to really decide all the issues presented by redesign,” he said, which “has been a real problem in a number of cases.”

“This inability of Customs to decide all the issues presented by a design-around tends to give a respondent a lot of opportunities to find its way past an exclusion order,” Reiser said. “I don’t know how that hole can be filled. I don’t know if that’s a legislative thing or a regulatory thing, but it would be useful, I think, for Customs to be able to deal with all the issues that are presented by this design-around.”

The ITC on Aug. 21 acknowledged Masimo’s lawsuit, telling the district court it may intervene and the case may affect the commission’s own handling of Apple’s exclusion order. Legal observers said the overlap illustrates the unusual tension between the trade agency’s adjudicatory role and the enforcement work carried out by CBP.

Masimo’s challenge under the Administrative Procedures Act appears to be unusual but not without precedent. Microsoft Corp. sued CBP in July 2013, also in the US District Court for the District of Columbia, over CBP’s enforcement of an ITC exclusion order against Motorola phones, arguing the agency had misconstrued the commission’s ruling.

The ITC weighed in with an amicus brief to defend its authority, and the case settled in October 2015 without a ruling on the merits.

Apple didn’t respond to a request for comment. CBP didn’t immediately provide a comment.

Due Process

Among other things, Masimo’s suit faults CBP for approving Apple’s work-around without giving it a chance to participate in what it says should have been an adversarial proceeding.

It’s often unclear when CBP will conduct enforcement proceedings with participation from both sides, known as inter partes, or instead hold them behind closed doors with only one party in an ex parte proceeding, said Jorge Contreras, a University of Utah law professor.

“This case is part of the fuzz,” said Contreras, who wrote a paper about CBP that’s been accepted for publication in The International Lawyer. “There was an inter partes procedure, but much of the later, detailed discussion was only between CBP and Apple.”

The way CBP handled that shift raises due-process concerns, said Nathan Mammen, a partner at Snell & Wilmer LLP.

“It is highly unusual for Customs to issue an ex parte ruling that effectively reverses an earlier inter partes decision made after giving Masimo a chance to be heard,” he said.

That posture “raises serious questions” about the agency’s compliance with administrative due process, Mammen said, because ex parte rulings are typically used only to preserve the status quo until all parties can participate.

“Legally, it really depends on an interpretation of the claim language,” he said. Practically, “the end result could be that Apple is allowed to import watches with the desired” pulse-oximetry features “that the ITC exclusion order had blocked.”

It isn’t unusual for companies to ask CBP to clear product changes so they can resume imports, he said. But here, Apple asked only CBP—not the ITC—to decide that its modified watches don’t violate the exclusion order. Mammen said that could open the door for Masimo to pursue an ITC enforcement action to have the commission levy daily penalties of as much as $100,000 or twice the value of the imported goods.

That again highlights the disconnect in the two agencies’ authorities, Reiser said.

“If they could have decided the issue of indirect infringement, that would certainly make more clear what’s really going on,” Reiser said. “Instead, they just said, ‘We’re not going to do that.’”

The case is Masimo Corp. v. US Customs and Border Protection, D.D.C., No. 25-cv-2749.