05 Jan’24

Masimo vs. Apple: The Role of the ITC in Patent Disputes

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As referenced in our previous blog, Demystifying the International Trade Commission (ITC), Apple made headlines in December 2023 for halting the sale of its latest Apple Watch Series 9 and Ultra 2 models in the US on December 21st. The reason behind this was a patent dispute between Apple and Masimo Corp. related to a blood oxygen sensor in which the ITC ruled Apple violated Masimo’s patents. While this came to media attention in late 2023, this case had been working its way through the court system for years, starting when Masimo won a patent infringement case against True Wearable in 2022. True Wearables’ founder and CEO Marcelo Lamego worked at both Masimo and Apple where he developed similar technologies before founding True Wearables. True Wearables’ founder first worked at Masimo and then contacted Apple CEO Tim Cook in 2013, offering to help with the Apple Watch. He subsequently joined Apple in 2014. At Apple Mr. Lamego was a named inventor on several health-related Apple patents before leaving to start True Wearables in 2014, after only a few months at Apple.  So Masimo found itself in a situation where both companies, True Wearables and Apple, were allegedly infringing its patents, which led to it taking legal action against both companies

In conjunction with the patent dispute against True Wearables which resulted in a permanent injunction against the sale of True Wearables infringing devices, Masimo also filed a Section 337 action at the ITC against Apple alleging that the company was importing into the US devices that infringed multiple patents held by Masimo. In Section 337 actions, the complainant must establish that a domestic industry for articles protected by the asserted patent(s) exists or is in the process of being established.  There are two requirements that must be met in regards to the ITC domestic industry analysis: an economic element and a technical element. The complainant  (Masimo) must show that one of the economic activities identified in 19 U.S.C § 1337(a)(3) has occurred to fulfill the economic requirement. These activities include: significant investment in plant and equipment, significant employment of labor or capital, or substantial investment in exploitation, including engineering, R&D or licensing. In regards to the technical element, the complainant must establish that it practices at least one claim in each asserted patent. One of the main arguments made by Apple was whether Masimo’s W1 smartwatch, or any product by Masimo, was actually released prior to the complaint being filed by Masimo. This is an area of active development and will likely feature prominently in the appeal by Apple which was filed on December 23, 2023.

In January of 2023, the ITC issued their Final Initial Determination that Apple was infringing on Masimo’s patents. The ITC then issued a limited exclusion order and cease and desist order against Apple in late October of 2023. Once this decision was made, the next step was a 60-day presidential review period where Apple hoped that President Biden would veto the ban as President Obama had done for Apple in 2013 in regards to the iPhone and iPad. However, as the 60-day review period approached its conclusion and there was no indication that President Biden would issue such a veto, Apple pulled the Watch Series 9 and Watch Ultra 2 from its stores and President Biden eventually declined to veto the ruling of the FTC. As a last resort, Apple filed an appeal with the United States Court of Appeals for the Federal Circuit (CAFC) and secured a temporary stay of the ITC’s importation and sales ban. On December 27, the Federal Circuit granted Apple’s request for an emergency stay.  This temporary could be extended through the conclusion of the ITC appeal which could take about 18 months.

The outcome of this appeal and any further actions are important to Apple as affected watch models have been some of its best sellers, accounting for a substantial portion of the company’s overall watch sales. Although Apple hasn’t publicly disclosed revenue figures, analysts estimate that the Apple Watch alone generated approximately $17 billion in sales in fiscal 2023. Moreover, the removal of the affected watches from Apple’s online store and physical retail locations only adds another layer of complexity to the situation, as the watches will still be available through third-party retailers. Apple is working across multiple venues to overcome the decision by the ITC. As referenced above, Apple filed the appeal and won a temporary stay and will push the CAFC to find in its favor and reverse the decision of the ITC. At the same time, Apple has submitted plans to the US Customs and Border Protection for a software solution. One other possibility in this complex dispute is for Apple to pay Masimo to end the dispute and put an end to the business disruption caused by this ongoing patent dispute.

The key takeaway from the events surrounding the Masimo patents is that the ITC is an important venue for patent enforcement in the U.S., where the range of remedies may actually include a physical importation and sales ban, particularly when it comes to products where the supply chain dictates importation of products manufactured overseas.  Stay tuned for more updates on this blog as the CAFC and ITC appeal proceedings continue in 2024.