Apple is Going Out of Business: Implications on the Medical Device Industry due to an Import Patent Disagreement with a Medical Device

While the Apple Watch is a popular product and makes up for roughly 30 percent of the smartwatch market, Apple won’t go under if the Apple Watch is out of commission in just the US. It will hurt to lose such a market, but it can still sell all of its Apple Watch models abroad. Similarly, the import ban wouldn’t affect every Apple Watch. The entry-level SE is unaffected by the ban as it doesn’t have blood oxygen sensing capabilities.

This ban is the result of a long-standing patent dispute between Apple and the medical device maker Masimo. The latter is known for its pulse oximetry tech, generally referred to as SpO2 or blood oxygen saturation in the wearable world, and it claims that Apple is using that patented technology without permission.

“Apple is a tough nut to crack,” says Brittingham, noting that Apple is one of the most sued companies in Silicon Valley. Taking Apple to court is very costly because of the company’s large cash reserves. Masimo is estimated to spent $60 million litigating the issue so far. I think they hold out as long as possible in order to make apple less appetizing.

“I think Apple sees the writing on the wall and they’re preparing themselves,” says Ben Levi, a partner at Levi Snotherly & Schaumberg, which has experience litigating ITC disputes.

Apple and the International Trade Commission: What Happened when Apple Reached Out About a Potential Agreement around Blood Oxygen Features on its Wearables?

This particular story started about 10 years ago when Apple reached out to Masimo about a potential partnership around blood oxygen features on its wearables. Apple reportedly stole Masimo’s chief medical officer and several engineers. The Apple Watch Series 6 features a SpO2 sensor to measure blood oxygen saturation levels.

It isn’t the case here that a company needs to show a public interest or health policy basis in order to get a veto. “It’s unlikely that the import exclusion order will be disapproved by the USTR and the president,” says Smith Brittingham, partner at Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. “The only real answer would be ‘Well it’s Apple.'”

It is very rare for the President to reverse a decision from the International Trade Commission and in my opinion, it is unlikely in this particular case.

The only real blow for Apple is if the rumors are correct and it’s working on sleep apnea detection. It would be harder to develop this feature if the sensors were lost. However, that feature would require a lengthy FDA clearance process. That means more advanced health features like sleep apnea detection are more of a medium to long-term concern — and it’s very possible that Apple will have a workaround by the time such features are ready for consumers.

Iancu says that for this route to succeed, it is dependent on the ITC ruling, specific patent, and what Apple plans to do with the product.

Apple cannot simply modify the code and call it a day. Masimo thinks the patents are related to hardware so disabling the sensor won’t work if the patent isn’t written well. Apple could remove it entirely from the design, but that would require mucking around with Apple’s meticulous supply chain and could take some time.

Then there are the options that would cost Apple some money. Apple could work out a licensing deal with Masimo. According to an interview with the New York Times, Masimo’s CEO said Apple did not engage in licensing negotiations. It’s an easy-seeming fix, so why not do it? Both parties have to be willing to settle.

“Every case is different, every patent is different,” says Levi. “Different complainants who bring up a case have got their own businesses, their own products, and those implicate a whole different set of facts.”

Iancu says everything is going as it should. The system is working as it was intended. If Apple wants to have products imported into the US, it should make sure that it comes up with its original inventions and does not infringe on other people’s patented technology.”