Masimo is a company that develops and manufactures non-invasive patient monitoring technologies, such as pulse oximetry, which measures the oxygen level in the blood. Masimo claims that Apple hired away some of its key employees, stole its trade secrets, and infringed its patents when it incorporated the pulse oximeter feature in its Apple Watch Series 6 and later models1.
Masimo filed a complaint with the U.S. International Trade Commission (ITC) in January 2020, seeking to block the import and sale of Apple’s infringing products in the U.S. The ITC is an independent federal agency that has the power to issue exclusion orders that prevent the entry of products that violate U.S. intellectual property rights2.
In September 2021, the ITC issued a final determination that Apple violated two of Masimo’s patents and ordered an import ban on Apple Watches that use the pulse oximeter feature3. Apple appealed the decision to the U.S. Court of Appeals for the Federal Circuit and asked the ITC to stay the ban pending the appeal, but both requests were denied.
Apple also asked the U.S. Trade Representative (USTR) to veto the ban, arguing that it would harm the public interest, especially during the COVID-19 pandemic, as the Apple Watch provides health and wellness benefits to millions of Americans. However, the USTR declined to intervene and let the ban take effect on December 26, 2021.
How Does the Import Ban Affect Apple and Its Customers?
The import ban is a significant setback for Apple, as the U.S. is its largest market and the Apple Watch is its fastest-growing product category. According to Counterpoint Research, Apple had a 28% share of the global smart watch market in the third quarter of 2021, followed by Samsung with 16% and Huawei with 9%. The U.S. accounted for 35% of Apple’s total revenue in the same period.
The ban affects the Apple Watch Series 9 and Ultra 2, which were launched in September 2021 and feature a new design, a larger display, and improved performance and battery life. The ban does not affect the Apple Watch SE, a lower-priced model that does not have the pulse oximeter feature, or the older models that were already sold in the U.S. before the ban.
Apple has stopped selling the banned models on its online store and physical stores in the U.S., but they are still available from other retailers, such as Amazon, Best Buy, and Walmart, until their stocks run out. Apple has also filed an emergency motion with the Federal Circuit to halt the ban until the U.S. Customs and Border Protection (CBP) decides whether the redesigned versions of its watches infringe Masimo’s patents. Apple claims that it has modified its software and hardware to avoid the patent infringement and has submitted its new products to the CBP for review. The CBP is expected to make its decision by January 12, 2022.
The import ban may affect the sales and customer satisfaction of Apple’s smart watches in the U.S., as some potential buyers may be deterred by the legal uncertainty, the limited availability, or the lack of the pulse oximeter feature. The ban may also damage Apple’s reputation and brand image, as it may be perceived as a copycat or a patent infringer by some consumers and media outlets.
How Does the Import Ban Affect Apple’s Competitors and the Smart Watch Market?
The import ban may create an opportunity for Apple’s competitors, such as Samsung, Huawei, Fitbit, and Garmin, to gain market share and attract customers who are looking for alternatives to the Apple Watch. These competitors may offer similar or better features, lower prices, or more compatibility with different operating systems and devices.
Some of these competitors already have smart watches that include the pulse oximeter feature, such as the Samsung Galaxy Watch 4, the Huawei Watch GT 2 Pro, and the Fitbit Sense. These products may appeal to consumers who value the health and wellness benefits of the pulse oximeter, especially during the COVID-19 pandemic. However, these products may also face legal challenges from Masimo, as the company has sued Samsung and Huawei for patent infringement in the past .
The import ban may also affect the overall growth and innovation of the smart watch market, as it may create uncertainty and barriers for new entrants and existing players. The ban may discourage some companies from investing in research and development, or from launching new products that may infringe Masimo’s patents. The ban may also reduce the consumer demand and confidence in the smart watch category, as some consumers may be confused or frustrated by the legal disputes and the product availability.
What Are the Possible Outcomes of the Import Ban?
The import ban is not the final resolution of the Apple-Masimo patent dispute, as there are still several legal avenues and scenarios that may change the outcome. Here are some of the possible outcomes:
- The CBP approves Apple’s redesigned products and lifts the ban. This would be the best-case scenario for Apple, as it would allow it to resume the import and sale of its smart watches in the U.S. without infringing Masimo’s patents. However, this outcome may depend on the technical details and the evidence that Apple provides to the CBP, as well as the CBP’s interpretation and evaluation of the patents and the products. Masimo may also challenge the CBP’s decision and seek to reinstate the ban.
- The Federal Circuit grants Apple’s emergency motion and stays the ban pending the appeal. This would be a temporary relief for Apple, as it would give it more time to sell its smart watches in the U.S. while the appeal is pending. However, this outcome may not be likely, as the Federal Circuit has already denied Apple’s previous request to stay the ban, and the ITC has opposed Apple’s motion. Moreover, this outcome would not resolve the underlying patent dispute, as the appeal may take months or years to conclude, and the Federal Circuit may uphold or reverse the ITC’s decision.
- Apple and Masimo reach a settlement and end the litigation. This would be a possible scenario for both parties, as it would avoid the prolonged and costly legal battles and the uncertainty of the outcomes. A settlement may involve Apple paying Masimo a lump sum or a royalty fee for using its patents, or agreeing to license or cross-license its patents with Masimo. A settlement may also benefit the consumers and the market, as it would restore the product availability and the competition in the smart watch category.
- Apple loses the appeal and the ban becomes permanent. This would be the worst-case scenario for Apple, as it would mean that it has to stop importing and selling its smart watches in the U.S. indefinitely, unless it can design around the patents or obtain a license from Masimo. This outcome would also have negative impacts on Apple’s sales, market