Earlier this year, the US International Trade Commission (ITC) delivered a verdict that sent shockwaves through the tech industry. Apple, the tech g
Earlier this year, the US International Trade Commission (ITC) delivered a verdict that sent shockwaves through the tech industry. Apple, the tech giant, was found to have infringed on two patents owned by Masimo, a prominent medical device manufacturer. The ITC’s ruling was clear: an import ban on the highly popular Apple Watch Series 9 and Ultra 2 would be enforced, starting December 26th.
In the unpredictable realm of legal battles involving tech giants, it’s not uncommon for companies like Apple to face lawsuits. However, the consequences are rarely as dramatic as an import ban. Many skeptics doubted whether such a ruling would truly materialize, considering Apple’s history of legal entanglements and its ability to navigate through them relatively unscathed.
However, as the critical date approaches, it seems this time might be different. Experts are casting doubt on Apple’s chances of avoiding the ban, emphasizing that without a Christmas miracle, the tech giant may be unable to circumvent the repercussions. The severity of the situation prompted Apple to take a surprising and preemptive measure: removing the affected watches from its online store as of December 21st at 3 PM ET. Subsequently, after the 24th, the watches will also vanish from Apple’s physical retail stores.
Ben Levi, a partner at Levi Snotherly & Schaumberg, a firm with a history of litigating ITC disputes, offered insight into Apple’s move, stating, “I think Apple sees the writing on the wall and they’re preparing themselves.”
The rarity of witnessing a Big Tech player endure such a significant loss, coupled with tangible consequences like a product import ban, underscores the gravity of the situation. While there are potential avenues for Apple to keep the watches available for sale, it’s anticipated that achieving this will either demand considerable patience or involve a substantial financial investment.
As the tech giant grapples with this unforeseen challenge, the industry watches closely, waiting to see if Apple can defy the odds and engineer a solution that allows the Apple Watch Series 9 and Ultra 2 to remain in the market.
iant, was found to have infringed on two patents owned by Masimo, a prominent medical device manufacturer. The ITC’s ruling was clear: an import ban on the highly popular Apple Watch Series 9 and Ultra 2 would be enforced, starting December 26th.
In the unpredictable realm of legal battles involving tech giants, it’s not uncommon for companies like Apple to face lawsuits. However, the consequences are rarely as dramatic as an import ban. Many skeptics doubted whether such a ruling would truly materialize, considering Apple’s history of legal entanglements and its ability to navigate through them relatively unscathed.
However, as the critical date approaches, it seems this time might be different. Experts are casting doubt on Apple’s chances of avoiding the ban, emphasizing that without a Christmas miracle, the tech giant may be unable to circumvent the repercussions. The severity of the situation prompted Apple to take a surprising and preemptive measure: removing the affected watches from its online store as of December 21st at 3 PM ET. Subsequently, after the 24th, the watches will also vanish from Apple’s physical retail stores.
Ben Levi, a partner at Levi Snotherly & Schaumberg, a firm with a history of litigating ITC disputes, offered insight into Apple’s move, stating, “I think Apple sees the writing on the wall and they’re preparing themselves.”
Reason to This Scenario
The recent imposition of an import ban on certain Apple Watch models stems from a protracted patent dispute between Apple and Masimo, a prominent player in the medical device industry. Masimo, renowned for its pulse oximetry technology, commonly known as SpO2 or blood oxygen saturation in the wearable technology landscape, alleges that Apple has incorporated its patented technology without proper authorization.
The origins of this contentious saga trace back approximately a decade when Apple initiated discussions with Masimo regarding a potential collaboration involving blood oxygen features in wearables. However, tensions escalated when Apple purportedly recruited multiple engineers and the chief medical officer from Masimo. The culmination occurred in the fall of 2020 with the release of the Apple Watch Series 6, marking Apple’s debut in incorporating an SpO2 sensor for measuring blood oxygen saturation levels.
The legal clash intensified in 2020 when Masimo filed a lawsuit in the US District Court, accusing Apple of misappropriating trade secrets and infringing on ten of its patents. Facing a protracted legal battle, Masimo pursued a separate case with the International Trade Commission (ITC) in 2021. In a tit-for-tat move, Apple countersued Masimo, alleging the creation of an Apple Watch clone, the Masimo W1 Medical Watch. The animosity between the two companies was palpable, but the crucial development came when the ITC sided with Masimo in January 2023, confirming that Apple Watches did indeed violate Masimo’s patents.
Subsequently, in October, the ITC issued the import ban and an order to cease selling products that infringed on Masimo’s patents and had already been imported. Presently, we find ourselves approaching the conclusion of a 60-day presidential review period, during which President Joe Biden or the US Trade Representative (USTR) has the authority to veto the ban. Should no veto occur by the end of this review period, the import ban will take effect, impacting the availability of certain Apple Watch models. The unfolding events underscore the complexity of intellectual property disputes within the rapidly evolving landscape of wearable technology.
Will Biden genuinely exercise his veto power?
Securing a presidential veto for Apple in this scenario would be akin to a rare cosmic event, like lightning striking the same place twice.
Andrei Iancu, co-chair of the Council for Innovation Promotion (C4IP) and partner at Sullivan & Cromwell LLP, brings a seasoned perspective, having served as the director of the US Patent and Trademark Office from 2018 to 2021. According to Iancu, overturning a decision from the International Trade Commission (ITC) is exceptionally unusual, making it an improbable outcome in this specific case.
Typically, for a veto to be granted, a company must demonstrate a public interest or health policy basis. However, industry experts are sceptical that such grounds exist in this particular dispute. Smith Brittingham, a partner at Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, expresses doubt that the import exclusion order will be disapproved by the US Trade Representative (USTR) and the president. As Brittingham succinctly puts it, “The only real answer would be, ‘Well, it’s Apple.'”
In the intricate world of legal maneuvering and trade decisions, the anticipation of a presidential veto adds a layer of complexity to the unfolding narrative. The general sentiment among experts is that the chances of Apple securing this extraordinary intervention are slim, emphasizing the rarity of such occurrences and the stringent criteria typically associated with obtaining a presidential veto. As the situation evolves, industry observers keenly await the outcome, recognizing that in the world of international trade and intellectual property disputes, predicting the future is often as challenging as securing a presidential veto itself.
Nevertheless, Apple has a track record of navigating complex legal waters successfully. A notable instance occurred in 2013 when then-President Barack Obama intervened, vetoing an import ban targeting the iPhone. The dispute arose when Samsung accused Apple of infringing on its cellular data patents. In a strategic move, Apple argued that fair, reasonable, and nondiscriminatory licensing (FRAND) issues existed in this case. The patents in question were deemed standard and essential, and the Obama administration feared that the import ban would grant Samsung excessive leverage. Importantly, the ban only affected the iPhone 4 and older iPad models, as newer iPhones utilized non-infringing chipsets.
Ben Levi, a partner at Levi Snotherly & Schaumberg, reflects on this past case, noting that Apple took a calculated risk a decade ago and managed to emerge successfully. However, Levi believes that replicating such a feat in the current scenario, involving the Apple Watch, is highly improbable. Unlike the iPhone situation, Apple lacks the arguments related to fair, reasonable, and nondiscriminatory licensing. This time, the legal landscape appears less favorable for Apple to pull off a similar maneuver.
The comparison between these two instances underscores the complexity of legal battles in the tech industry and the strategic considerations that major players like Apple must weigh. As the specter of a potential import ban looms over the Apple Watch, the company faces a markedly different challenge, and industry watchers are keen to observe the unfolding dynamics in this high-stakes legal saga
What direction does Apple take from this point forward?
What direction does Apple take from this point forward?
Securing a Hail Mary veto might be a long shot, but Apple is far from conceding to an import ban that affects a substantial $17 billion segment of its business. Apple’s spokesperson, Nikki Rothberg, conveyed to The Verge that the company is actively exploring various legal and technical avenues to ensure the availability of the Apple Watch to its customers. This commitment signals Apple’s determination to reintroduce the product, leaving the method of reentry as the central question.
While Apple has expressed its intention to appeal the decision, the appeal process is a protracted one, typically stretching over about 18 months. Additionally, the company may seek a stay on the import ban, but industry experts like Brittingham cast doubt on its approval, citing the need for Apple to prove irreparable harm, a formidable task.
Despite the Apple Watch’s significance, constituting approximately 30 percent of the smartwatch market, the impact of its absence in the US alone is unlikely to push Apple to the brink of business failure. The company can still capitalize on overseas markets to sell its other Apple Watch models. Moreover, the import ban’s scope is not universal; the entry-level SE, lacking blood oxygen sensing capabilities, remains unaffected.
Notably, industry insiders, including Brittingham and Levi, suggest a potential workaround for Apple to bypass the import ban entirely. This involves redesigning the Apple Watch to circumvent the infringed patents during the appeals process. By implementing a firmware update that disables the SpO2 sensor, Apple could theoretically resume importing and selling Apple Watches. Recent reports from Bloomberg reinforce this notion, indicating that Apple engineers are actively modifying the blood oxygen algorithms on the watches. An unnamed Apple spokesperson mentioned plans to submit a workaround to the US customs agency, signaling Apple’s proactive approach to swiftly restoring the product to store shelves.
As the legal drama unfolds, Apple’s strategic maneuvers to navigate this challenging situation highlight the resilience and adaptability of a tech giant determined to overcome obstacles in a dynamic market landscape.
In the quest to sidestep the import ban on certain Apple Watch models, the road to success hinges on intricate legal considerations, according to Andrei Iancu, co-chair of the Council for Innovation Promotion (C4IP) and partner at Sullivan & Cromwell LLP. The viability of this route depends on the specific patent, the International Trade Commission (ITC) ruling, and the nature of Apple’s redesign strategy.
From a legal standpoint, any modification undertaken by Apple must be substantial enough to evade the patent, avoiding what’s known as a ‘colorable’ difference. Iancu emphasizes that minor tweaks won’t suffice, and Apple needs to navigate these changes judiciously. Notably, Masimo, the medical device maker in question, asserts that the patents pertain to hardware, raising challenges even if Apple were to entirely disable the sensor. Complete removal, while a potential solution, would disrupt Apple’s meticulous supply chain and require a considerable timeframe.
Among the options available, Apple faces the dilemma of investing time and resources in significant alterations or exploring potential licensing negotiations with Masimo. However, Masimo CEO Joe Kiani revealed in a New York Times interview that Apple had not engaged in licensing discussions. While a licensing deal may seem straightforward, it necessitates willingness from both parties, and Apple’s reputation as a formidable legal adversary adds a layer of complexity. Apple, being one of the most litigated companies in Silicon Valley with substantial cash reserves, often employs a strategy of resisting legal challenges until they become less appealing for litigants.
Another alternative for Apple is to skirt the import ban by choosing to manufacture the watches within the United States instead of overseas. However, Iancu acknowledges that such a significant supply chain shift is unlikely to materialize swiftly.
As Apple contemplates its next move in this high-stakes legal battle, the strategic decisions it makes will not only impact the future of the Apple Watch but also serve as a compelling narrative in the intricate interplay of legal maneuvering within the tech industry.
Does this establish a precedent?
Facing an import ban is not a unique challenge for Apple, as it grapples with another hurdle related to its EKG features in a dispute with AliveCor. In February, the Biden administration opted not to veto an International Trade Commission (ITC) import ban and cease-and-desist order stemming from this AliveCor case. Here, AliveCor alleged that Apple unlawfully utilized its technology in developing the Apple Watch’s EKG feature, resulting in patent infringement.
While the AliveCor and Masimo cases may appear similar, legal experts caution against assuming one outcome reflects the other. Ben Levi emphasizes that each case is unique, with different complainants, businesses, and products, all contributing to distinct sets of facts.
A pertinent example is the AliveCor import ban, granted by the ITC but rendered ineffective by a ruling from the Patent Trial and Appeal Board, deeming AliveCor’s EKG tech non-patentable. To impact Apple Watches with EKG features, AliveCor would need to succeed in appealing this ruling.
Andrei Iancu asserts that the system is operating as intended, emphasizing that for Apple to import products into the US, it must ensure original inventions and avoid infringing on patented technology.
While the likelihood of the import ban on certain Apple Watch models appears high, it doesn’t signify a permanent obstruction to purchasing Apple Watches in the US. Notably, the SE model remains unaffected. In the short term, third-party resellers can continue selling their Series 9 or Ultra 2 inventory. The real challenge arises when their stock depletes, and replenishing becomes contingent on Apple’s ability to supply more units.
Apple’s potential courses of action include settling with Masimo, navigating the hardware issue via a software update, or, as a less likely scenario, removing the sensor until Masimo’s patents expire in 2028. The method chosen and its timeline remain uncertain, adding an element of intrigue to Apple’s response strategy in this legal saga.
