United States Apple Watch import ban has begun with no resolution in sight
US customers seeking anything other than an Apple Watch SE may find it difficult, as the Apple Watch Series 9 and Apple Watch Ultra 2 are no longer being imported until further notice.
Apple Watch Series 9
A patent lawsuit from Masimo led the United States International Trade Commission to recommend an import ban on infringing Apple Watch models. That means Apple had to halt import of the Apple Watch Series 9 and Apple Watch Ultra 2 since they are the only new models sold with blood oxygen sensors.
Apple hopes a software update will be enough to satisfy customs and enable the import of Apple Watches in the meantime as it appeals the patent lawsuit. Another probable option is settling with Masimo, though it seems Apple has avoided approaching that so far.
There was some hope that President Biden's administration might step in and prevent the ban from going into effect. Apple wouldn't need to take action if the White House allowed a stay on the ITC's order until the patent trials were fully resolved.
"After careful consultations, Ambassador Katherine Tai decided not to reverse the ITC's determination and the ITC's decision became final on December 26, 2023," a statement by the Office of the US Trade Representative has declared.
However, now the ban has gone into effect, and Apple must comply. The ban begins December 25, at the end of the North American holiday season, which should help prevent the ban from causing too much damage in the short term.
Whether a software update, settlement, or other occurrence allows Apple to import Apple Watches again, the next crucial gift-giving holiday in the United States isn't until February -- Valentine's Day. While Apple can't sell the affected models, third-party sellers like Best Buy can sell out their inventory, and there is no way of knowing how long that may take.
Beyond a settlement, Masimo believes nothing short of hardware changes will allow Apple to resume sales in the United States. The situation is unprecedented, so there is no predicting what Apple may do, as the next hardware update isn't due until September 2024.
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Comments
Apple probably will end up setting.
https://www.cablesandsensors.com/pages/history-of-pulse-oximetry
https://en.wikipedia.org/wiki/Pulse_oximetry
The options I can see are: removing the hardware (not feasible without creating a new watch model,) settle on royalties with Massimo, get the administration to block the ban (doesn't seem likely at this point,) or win a legal battle (unclear if and when that would occur.) If I were apple I would have had a negotiated royalty agreement in place with Massimo while waiting to see if the administration would overturn. If the administration didn't overturn then you bite the bullet and pay royalties. I can't imagine how much even a relatively short ban will cost Apple but it's hard to imagine the royalties not being worth it.
We already know the US patent process is badly flawed and ineffectual in many cases. The patents in question were declared invalid by the USPTO but the ITC disagreed and their marching orders are to act promptly and not drag on for years, as is often the case with the USPTO. There’s still a chance that Apple could prevail in the long run, but it won’t make up for lost sales.
My gut feeling is that Tim Cook has created a mini Manhattan project within Apple to get its next generation Apple Watch to market on a greatly accelerated schedule. The Series 9 and Ultra 2 are obviously very incremental updates to buy Apple more time to develop the next gen Watch, which in all likelihood was targeting a Summer 2024 or Fall 2024 release. If they can pull this in even a few months it would limit the damage due to lost US sales while Apple continues to market the hell out of the Series 9 and Ultra 2 outside of the US.
In the long run Apple doesn’t want to create another external dependency with another company like it has with QualComm. I’m sure that Maximo would love to hitch a ride on the Apple money train for many years to come. I’d bet that Masimo’s expectations for getting the non-compliant products back into the US sales stream would be exorbitant given the fact that the patents in question only have a few more years of exclusivity remaining on them. All the while Apple and Masimo will be battling it out in the USPTO.
Apple needs to control its own destiny.
It makes sense for Apple to do things in-house because they can scale better without relying on 3rd party components.
He also says Apple could have avoided the ban by making the watches/sensors in the US so that's an option Apple could use.
I wonder how companies like Fitbit are getting around it as they have blood oxygen sensors too.
The Masimo CEO says he's open to negotiating with them. I expect Apple will appeal first.
If blood oxygen sensing is important enough to have on the Apple Watch, they might be able to negotiate licensing but it doesn't seem like it's all that useful for most people. It's not something that commonly goes wrong but is probably good for mountain climbers to have:
https://www.popularmechanics.com/science/health/a3890/4298495/
https://www.outsideonline.com/outdoor-gear/tools/pulse-oximeter-everest-safety-gear/
If Fitbit can get away with having blood oxygen sensors, Apple can too.
While the ITC ban could be avoided by making the infringing articles domestically, that doesn't seem like a way around the underlying patent.
Apple could negotiate a license, and that license could have contingent payment: eg you put all this money in escrow until the appeal is complete. If Apple wins, you give it all back.
In the end, it seems that Apple just doesn't believe that it infringed, and Masimo is simply a patent troll. They refuse to feed the troll. Some might call that spite. Other might call it principled business operations.
Massimo is an active player in medical pulse oximetry equipment so I don't see how anyone can call them a 'patent troll.' That's just a derogatory label because you don't like how the rulings went.
Company is valued at $6b:
https://finance.yahoo.com/quote/MASI
If Apple manages to avoid either, the cost is $0 so it's the most obvious route to exhaust first. This is just one watch component out of dozens, they can't go around spending billions buying companies for small features if they don't need to but Masimo might be able to offer more types of sensor and higher quality than they have and they generate over $1b/y in revenue.
It would be easier to leave the sensor out and make it a BTO option and pay the license for those. I doubt most buyers will bother about it. There was a test here of the feature vs medical grade equipment and it was to tell if people are breathing bad air:
https://pubmed.ncbi.nlm.nih.gov/36249475/
For diving and mountain climbing, it's a useful feature but those activities can use other devices and the Ultra can ship with it.
Also Masimo already won a $466 million lawsuit against Philips over this same tech: https://www.reuters.com/article/us-philips-masimo-verdict-idINKCN0HQ54W20141002/ and unlike Apple, Philips is actually a medical device manufacturer. Unfortunately for Philips, they are based in the Netherlands and not the U.S. More on this later.
There are tons of other companies who make smartwatches that offer SpO2 monitoring: Garmin, Withings, Oura (who offers it in their "smart ring"), FitBit, Google, Realme, Amazfit and OnePlus. If Amazfit can offer SpO2 in a $150 watch then it means that licensing this tech would have been cheaper than raiding Masimo for talent even if Masimo hadn't sued. So nothing to "get around." Just pay for the tech that you use like everyone else.
My guess: Apple is used to getting away with "sherlocking" like this. After the Obama administration overrode Apple's appropriation of Samsung's wireless technology https://www.forbes.com/sites/connieguglielmo/2013/08/03/president-obama-vetoes-itc-ban-on-iphone-ipads-apple-happy-samsung-not/?sh=67f3cb488c3d on iPhones and iPads, Apple clearly thought that they could just keep doing it. The best part: the Obama administration didn't even object to the ITC's ruling against Apple itself! Instead, their rationale was that an import ban on iPhones and iPads would harm the U.S. economy. (Compare Samsung having to fork over hundreds of millions to Apple over "trade dress" but Apple getting off scot free for just taking Samsung's wireless tech.) A writer for The Verge - in the comments, not in the article - pointed out that the Biden administration would be way less likely to side with Apple over another American company like Masimo as opposed to a foreign competitor like Samsung. Note how Apple lost their patent fight against Qualcomm - no claiming otherwise as the "out of court settlement" between the two was for the terms that Qualcomm demanded in the first place - and Qualcomm is also an American company.
And as for "doing things in-house", I know that Apple is trying to integrate as many components as possible into the SOC, but they are either going to have to come up with their own non-infringing implementations of them or license the designs from Broadcom and everybody else.
But here is the deal with FitBit: they were going bankrupt. And they had no other prospective buyers. (Google likely regrets buying them at this point.) Had Google not bought them, they would have declared bankruptcy and their spare parts - patents and user health data - would have been auctioned off to the highest bidder. That's exactly what happened with one of FitBit's competitors back in the day, JawBone. Some penetration tester (that is a cybersecurity thing by the way) found out that there is actually a server out there still collecting data from the JawBone Fitness trackers to this day and no one knows who owns the server or what they are doing with the data that they are collecting. Had that happened with FitBit it would have been a nightmare, meaning that Google buying them and keeping FitBit data away from the companies that would have bought it from the bankruptcy courts was actually a positive thing. And yet the governments still fought it tooth and nail and was able to keep the acquisition tied up for years.
So, what makes you thing that the U.S., the EU etc. would let Apple go anywhere near Masimo, a leading manufacturer in a vital, strategic and heavily regulated sector (healthcare)? If Apple had a legitimate interest in taking Masimo's place as a provider of healthcare equipment, then they would at least consider it for maybe a half hour before saying "no." But Apple buying them just to grab their patents and shut them down over a grudge? Yeah, sure the government would go all for that. Go to their website. Look at the huge range of healthcare products and services they provide. (It isn't just SpO2 monitors.) You be the one to make the case that Apple just licensing Masimo's IP is somehow a worse outcome for the healthcare industry than Apple buying them just to take their patents - which again is WAY more than SpO2 stuff - and shutting them down.