ITC helps protect smaller companies’ innovations- Apple vs. Masimo proves

That’s because of a ruling Thursday by the International Trade Commission that most Apple Watches contain parts that infringe on patents held by Masimo Corp., a producer of medical technology, and its sister company, Cercacor Laboratories Inc., both of Irvine, Calif. An import ban and a cease-and-desist order on sales both take effect on Dec. 26 — unless President Biden reverses the decision by Dec. 25, which appears unlikely. (Presidents rarely overrule the independent, nonpartisan agency, which was founded in 1916 as the U.S. Tariff Commission.)

Masimo argues that Apple’s reputation for innovation is undeserved and that the company has made a practice of “efficient infringement” — using other companies’ technologies without permission and dealing with the legal fallout as necessary. The company points to something that Steve Jobs, Apple’s co-founder, said in 1996: “Picasso had a saying. He said, ‘Good artists copy; great artists steal.’ And we have, you know, always been shameless about stealing great ideas.”

Let’s back up. Masimo, while not a household name, is a recognized world leader in patient-monitoring technologies for hospitals. It has possibly the best light-based pulse oximeter, which uses red and near-infrared light emitters and detectors to see how red, and thus how oxygen-rich, the blood in the arteries is.

Partly thanks to software that efficiently extracts signal from noise, Masimo’s pulse oximeter works even when patients are moving around or when they have a weak pulse. By using it on premature infants with underdeveloped lungs, hospitals can give them precisely the amount of oxygen they need — a good thing because too much oxygen causes blindness. It’s also good for patients on heavy opioids, which can suppress the drive to breathe.

Apple finally introduced its first watch with pulse oximetry, the Series 6, in 2020. It has incorporated pulse oximetry into all of its smart watches since then, with the exception of the cheaper Apple Watch SE. That means Apple will have to stop selling all its watches except the SE model starting on Dec. 26 unless something happens before then: Either the companies cut a deal, the U.S. trade representative’s office recommends to Biden that he reverse the ruling, or Apple persuades the Federal Circuit Court of Appeals to stay the injunction while it considers an appeal.

The I.T.C. case is only one front in the battle between Masimo and Apple. In 2020, Masimo sued Apple in Federal District Court in California, alleging theft of trade secrets. The suit ended in a mistrial in May when the jury deadlocked. The case is being retried. Last year, Apple sued Masimo in federal court in Delaware, charging that Masimo was the one doing the illegal copying and was trying to knock Apple out of the market to make way for its own watch. Masimo counter-claimed that Apple had infringed its patents, falsely advertised its watches’ capabilities and violated antitrust and fair competition laws. In a separate action this September, the Federal Circuit Court of Appeals affirmed the Patent Trial and Appeal Board’s invalidation of some of Masimo’s patent claims, but rescued others.

Kiani told me that his company has spent more than $60 million on its legal fights with Apple. He said he thinks the I.T.C. ruling in Masimo’s favor will help the company in other jurisdictions, even though it’s not binding for them, because the I.T.C. is a reputable agency that did a deep dive into the allegations. “The same patents Apple was found to have infringed at the I.T.C. are also at issue in Delaware District Court litigation,” the company wrote me in an email.

Masimo has been moving into consumer markets with products including the W1, a smart watch that competes with the Apple Watch. Neither company has yet received approval from the Food and Drug Administration to claim its product is suitable for medical use. Kiani argues that Apple’s technology is inferior and has given pulse oximetry a bad name with customers.