Apple announced on Monday that it will temporarily halt the sales of its Series 9 and Ultra 2 smartwatches in the United States due to an ongoing patent dispute. This dispute revolves around the technology used for the blood oxygen feature on these devices, which allegedly infringes on the patent rights of medical technology company Masimo.
This decision comes in response to an order issued by the U.S. International Trade Commission (ITC) in October, which has the potential to prevent Apple from importing its Apple Watches into the country. As a result of this news, Apple’s shares experienced a 1.4% decline. However, the final decision on this matter rests with President Joe Biden, who will review the case until December 25. Apple has stated that it is taking necessary measures to comply with the ruling if it is upheld.
The Office of the U.S. Trade Representative, which is responsible for handling this case within the Biden administration, has confirmed that Ambassador Katherine Tai is thoroughly evaluating all aspects of the situation.
The watches will no longer be available for purchase on the company’s website starting from December 21, and sales will also be halted at Apple retail stores after December 24. However, it is important to note that other models, such as the Apple Watch SE, which do not have the blood oxygen sensor, will not be affected by this issue. Ryan Reith, the program vice president for research firm IDC’s mobile device tracking efforts, reassures that the holiday sales of Apple Watches in the U.S. will not be impacted. He further explains that if the ruling remains in effect, the full consequences will be felt in January and February, which are typically slower sales months for Apple.
Reith stated that Apple currently possesses a substantial amount of inventory for Watch 8 and SE, ensuring the availability of their products during that period. However, the larger concern lies in whether Apple will be able to utilize the blood oxygen sensor technology in question for future devices. It remains uncertain if they will need to reach a settlement or develop a new solution.
During an interview with CNBC in October, Masimo CEO Joe Kiani expressed his willingness to engage in negotiations with Apple. In a statement released on Monday, Masimo emphasized the importance of respecting the ITC decision, which safeguards intellectual property rights and upholds public trust in the United States’ patent system. Additionally, it encourages the growth of the US industry.
Counterpoint Research reports that Apple holds approximately 25% of the global smartwatch market, a figure that typically increases to over 33% during the holiday sales seasons in the US and Europe. The Series 9 and Ultra 2 models will continue to be available for purchase worldwide, even during the Lunar New Year season in Asia.
Apple has expressed its disagreement with the ITC’s ruling, deeming it incorrect, and plans to appeal the decision to the Federal Circuit.
Masimo has alleged that Apple has poached its employees, misappropriated its pulse oximetry technology, and integrated it into the immensely popular Apple Watch.
In May, the jury trial regarding Masimo’s claims in a California federal court concluded with a mistrial. Apple, on the other hand, has filed a separate lawsuit against Masimo for patent infringement in a federal court located in Delaware. Apple has accused Masimo of using legal tactics to pave the way for its own smartwatch, which competes with Apple’s.
Apple’s requests to review the validity of the patents involved in the ITC decision earlier this year were rejected by the U.S. Patent and Trademark Office.
Since 2013, no presidential administration has overturned an ITC ruling, except for President Barack Obama’s administration, which lifted an import ban on Apple’s iPhones and iPads due to a patent dispute with Samsung.
In February, the Biden administration decided not to veto a separate import ban on Apple Watches, which was based on a patent-infringement complaint from medical technology company AliveCor. However, the ITC has temporarily suspended the ban for other reasons.
According to a company report, Apple’s wearables, home, and accessory business, which includes the Apple Watch, AirPods earbuds, and other products, generated $8.28 billion in revenue during the third quarter of 2023.
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