Context: A court filing on Monday (January 15) by patent holder Masimo revealed that U.S. Customs and Border Protection (CBP) has cleared a version of the Apple Watch that comes without pulse oximetry (previous article), a feature that the United States International Trade Commission (ITC) deemed to infringe. At the moment, Apple can still import into the U.S., and sell in the U.S., Apple Watches with that feature thanks to a short-term stay granted by the United States Court of Appeals for the Federal Circuit (December 27 ip fray article), which could go away any day now.
What’s new: Late on Monday, Apple filed with the Federal Circuit its reply brief in support of its motion for a stay pending the entire appellate proceedings. Apple argues that despite customs clearance of an Apple Watch without that feature, it would still suffer irreparable harm (while Masimo would not, as it is not selling any non-negligible quantities of a competing product) if forced to sell Apple Watches without that feature. Apple’s reply brief reinforces various reasons for which Apple believes the ITC decision cannot stand.
Direct impact: Briefing is now complete and the Federal Circuit could decide on a longer-term stay anytime. Apple has good arguments for why it may prevail, but its irreparable-harm case would obviously be much more compelling if the Apple Watch had to be removed from the U.S. market altogether. The appeals court may or may not be swayed by the fact that the feature is potentially life-saving in cases where people are warned in time of a deteriorating health condition and can seek medical help before it’s too late. The interim stay granted on December 27 could be seamlessly extended by a stay pending the entire appellate proceedings, or the Federal Circuit could reject Apple’s motion for the longer-term stay, in which case the import ban would enter into force again and Apple would be able to import only Apple Watches without pulse oximetry into the U.S. market, unless and until Apple creates a workaround that provides identical or similar functionality to end users without falling within the scope of the ITC decision, which is something Apple may be working on.
Wider ramifications: If the Federal Circuit grants a stay pending the entire appellate proceedings in the current circumstances and later overturns the ITC decision, it will be a huge blow to the agency’s credibility. A lot of the public commentary is reflective of a David vs. Goliath solidarity syndrome and Apple often does like to leverage its vast resources and market power, but in this particular case the behemoth is a good-faith defendant, while the small patent holder’s conduct and arguments raise serious questions.
Apple’s reply brief contradicting the ITC’s and Masimo’s opposition briefs (ip fray article on those filings, strongly criticizing the ITC) is very persuasive on Apple’s likelihood of success on the merits:
Apple reiterates that Masimo’s complaint never should have been investigated in the first place as Masimo lacks an actual domestic industry. In order to obtain a U.S. import ban (formally called “limited exclusion order”) from the ITC, a complainant must commercialize the patented invention in the U.S. through an actual article or licensing. In Masimo’s case, the argument was an article that was basically just being designed, but not really available. Apple says that if this was the standard, “complainants with
CAD software and a future-product idea [would have] access to [U.S. import bans].”
With respect to whether Masimo’s patents are valid (and some other Masimo patents have recently been invalidated), Apple also believes to be able to prevail. Where ip fray definitely agrees with Apple is that “the enablement standard {which the ITC said Apple failed to meet] is lower when assessing whether prior art anticipates an
asserted claim than when deciding enablement under §112.” That is so obvious. The whole idea of prior art is not that the prior art itself must be patentable. Many rejected or (for whatever reasons) abandoned patent applications nevertheless consttitute prior art.
Apple sets the record straight with respect to the timeliness of arguments and actually turns it around by saying the ITC itself waived certain arguments. The timing of when certain arguments were made comes up in another validity-related context (other than the enablement part), but also with a view to laches (the theory Apple fields against Masimo having waited 13 years after the provisional patent application to then file a continuation application shortly after the launch of the Apple Watch, designed to read on that product).
In the laches context, Apple argues that there is no legal rule according to which “a [party bringing a motion] that raises an issue in a succinct manner must suffer the same punishment as one that fails to raise it at all.”
Apple’s best bet for an extended stay is now that the Federal Circuit looks at these appellate arguments and considers it very likely that Apple will defeat the ITC. If the Federal Circuit merely sees a significant potential of Apple prevailing, but is not strongly convinced, then the balance of the equities (how either side is harmed) and the public interest will be outcome-determinative for this motion to stay enforcement.
In that context, the fact that Apple can sell Apple Watches without pulse oximetry and has in fact obtained customs clearance makes it less likely that Apple gets another stay than it was to win (as it did) the emergency stay last month. But “less likely” doesn’t mean it’s extremely unlikely. There is harm to Apple that is significant, and lives could be lost as a result of the ITC’s decision being enforced (though the appeals court obviously knows that Apple could take a license from Masimo, or acquire Masimo altogether, if it wanted; but if Masimo’s case is rather questionable, which it also is in ip fray‘s view, then Masimo is not entitled to such a reward). What is actually the harm to Masimo? Those public commentators who are sympathetic to Masimo largely just feel that Masimo should get leverage right here and now to force Apple into a settlement. In other words, because the little guy wielding a couple of patents (which may not even be valid) would then potentially be the winner that takes it all, they’d like the import ban to be enforced. That is a merits-be-damned attitude and ideologically ignorant of the fact that Masimo’s case is a dubious one.
Other than having to litigate this appeal, Masimo would not suffer any noteworthy harm from Apple being allowed to continue to sell Apple Watches with pulse oximetry as a result of an extended stay. Apple’s filing recalls that “Masimo sells the W1 watch in de minimis quantities in the U.S., it has not put the W1 in the consumer (as opposed to clinical) channel, and Masimo’s ‘Freedom’ watch has never been sold.”
It is impossible to predict whether the stay will be extended, though ip fray believes that the longer-term stay should be granted. It is just impossible to know whether the judges resolving the motion under severe time constraints will develop a very strong feeling that Apple is going to win in the end. All that one can say already is that if the Federal Circuit grants Apple’s motion, then there’s at least an 80% likelihood that the decision will have been reached based on the initial conclusion that the ITC decision will be overturned. So the really bad news for Masimo would not be that Apple can continue to import and sell Apple Watches with pulse oximetry, but that Masimo and the ITC would be on the losing track, at least with an overwhelming probability.