Context: After securing customs clearance of a version of the Apple Watch that comes without pulse oximetry and therefore can’t be alleged to infringe Masimo’s patents, Apple nevertheless argued for an extended stay of the enforcement of the exclusion order (import ban) by the U.S. International Trade Commission (ITC) (previous article on this dispute). As ip fray noted, the fact that the Apple Watch was not going to disappear from the market altogether weakened the argument for a longer-term stay. The United States Court of Appeals for the Federal Circuit had granted an interim stay in late December so it could first receive full briefing on Apple’s motion to stay enforcement for the entire duration of the appellate proceedings (December 27 article on this dispute).
What’s new: The Federal Circuit has just denied Apple’s motion for a stay. While the court doesn’t state specific reasons and merely lays out the legal standard, it appears that the merits of Apple’s appeal were not even considered, at least not in detail, and the motion was resolved on the basis of Apple being able to keep the Apple Watch on the market, albeit without pulse oximetry. As of 5 PM Eastern Time tomorrow (Thursday, January 18, 2024), the ban enters into force again with respect to the Apple Watch that comes with pulse oximetry.
Direct impact: Apple now has different options. It can negotiate with Masimo as the latter has only limited leverage: it can’t exclude the Apple Watch as a whole from the U.S. market. Apple can pursue the appeal, and the way the Federal Circuit explains how it reached the decision (and how quickly it got there after briefing was complete) doesn’t mean anything for the merits of the actual appeal. As ip fray already noted on an earlier occasion, Apple might also be able to work around the exclusion order in a way that does provide pulse oximetry functionality (just with a different implementation). In that case, Apple would have to submit another modified version of the Apple Watch to the Exclusion Order Enforcement (EOE) Branch of U.S. Customs and Border Protection (CBP) for review.
Wider ramifications: Should some Apple watches come without pulse oximetry, even if only for a transitional period, then there is a risk of some users not receiving a warning when their blood oxygen level goes down and potentially suffering harmful consequences, potentially even dying because they weren’t told to seek medical help while they still could. As for patent enforcement and the ITC in general, the decision is neutral and the outcome of the actual appeal must be awaited (unless there never is a final appellate opinion due to a settlement).
Here’s the Federal Circuit order:
The appeals court notes the relevant four factors, of which the likelihood of the appeal succeeding on the merits is only one. In the paragraph following the case-neutral description of the standard, the only one that is referenced is the second one (“whether the movant will be irreparably harmed absent a stay”) because the order explicitly mentions “the recent EOE Branch ruling” (for the explanation of the abbreviation, see the third section of the fray4 summary further above.
The clarification that the court has “reach[ed] no conclusion on the merits of the appeal” doesn’t mean that the merits weren’t considered at all. It merely means to say they haven’t already prejudged the case. But it says a lot that this decision came down relatively shortly after the final pleading (Apple’s reply brief) and that the only case-specific aspect to be mentioned in the order is the clearance of a workaround version of the Apple Watch. ip fray suspects that Apple’s ability to keep the Apple Watch on the U.S. market mattered most to the three-judge panel (Judges Lourie, Prost and Taranto), so much so that Apple’s motion would have succeeded only if there had been a huge error in the ITC ruling. It would have had to be an error that the appeals court would have been more or less totally convinced of, even just on the basis of the relatively short briefing at the motion-to-stay stage and without the benefit of a hearing.
ip fray believes Apple raises serious issues about the ITC decision, and it would be a mistake to consider that appeal likely to fail. However, such questions as whether Masimo acted abusively by filing a continuation application 13 years after the original one and only weeks after the launch of the first Apple Watch with pulse oximetry may not lend themselves to the hasty decision that is required when a motion to stay must be resolved.
Masimo’s leverage is limited because pulse oximetry doesn’t drive demand for the Apple Watch. Darrell Etherington of TechCrunch even wrote: Apple’s fix for the Apple Watch Series 9 and Ultra 2 sales ban could be disabling a useless feature. In terms of whether end users look at their blood oxygen level, those users will be few and far between, therefore not impacting sales to any non-negligible extent.
There are uses cases, though. As a matter of fact, the author of this article did keep an eye on blood oxgen levels about 9 years ago (using an Android phone and measuring at a finger) due to a temporary condition that lasted only a couple of weeks, never occurred before and hasn’t occurred since (relatively high blood oxygen levels (alkalosis), though only marginally above the normal range).
The most important application of the pulse oximetry feature of the Apple Watch may be that it warns people. End users rarely buy a product because of a warning they hope will never be necessary (unless they already have a health condition that suggests so, in which case they may actually use dedicated devices rather than smartwatches).
It is, unfortunately, a fact that people may die as a result of Masimo’s enforcement of potentially ill-gotten patents (given the filing history and in light of Apple’s invalidity arguments; also, Apple has raised a serious question concerning Masimo’s ability to satisfy the ITC’s domestic industry requirement). There may be situations in which people are now not going to be warned of a deteriorating condition, but if their Apple Watch had come with pulse oximetry, they’d have been able to request medical help just in time.
Today’s decision doesn’t mean Apple’s appeal won’t succeed. If Apple believes in its ability to prevail, it may just sell the workaround version of the Apple Watch for about a year.
Alternatively, the stage would now be set for Apple to work out a deal under which Masimo wouldn’t be able to demand unrealistically high license fees, given that Apple can credibly threaten Masimo with just selling the workaround version if all else fails.
The most interesting development here would be if Apple submitted in the near term another workaround to CBP’s EOE Branch: one that would provide pulse oximetry, but implement it in a way that can’t be argued to violate the import ban. ip fray has no knowledge of whether Apple has plans for that, but it would be unsurprising. If such a workaround got cleared, the commercial value of Masimo’s patents with a view to Apple would be very low.
The real issues in that case are whether Masimo never was entitled to an import ban (for lack of an actual domestic industry commercializing the invention) and whether Masimo abused the patent filing process. If Apple was right on those two counts, Masimo would have abused the processes of two U.S. government agencies (the United States Patent and Trademark Office (USPTO) and the ITC). It would be desirable for those questions to be addressed by the Federal Circuit.
But if Masimo makes Apple an offer now that it can’t refuse (because the cost would be so low that Apple would rather sell the Apple Watch with pulse oximetry despite hardly any end-user demand), a deal may fall into place. This may be Masimo’s last chance to get anything from Apple.