Apple on Monday said it would pause sales of its Watch Series 9 and Ultra 2 in the U.S. due to an ongoing patent dispute. The patents in question cover the blood oxygen feature in the watches, and belong to medical technology company Masimo. Apple itself said it would halt sales of its latest oxygen sensor-equipped smart watches online starting December 21, and in retail starting December 25.
The dispute's roots lie in Masimo's claims that Apple's blood oxygen sensor infringes on 15 of its patents. The ITC ruling, announced in October, upheld a judge's decision from January and triggered a 60-day Presidential Review Period, which will be expiring on December 25. Despite the possibility of a veto from President Biden, Apple decided to halt sales of its latest smart watches as a proactive measure.
Sales of the affected Apple Watch models will cease on Apple's website after 3 PM ET on December 21 and in Apple's retail stores after December 24. Notably, this ban is exclusive to Apple’s direct sales channels; third-party retailers like Amazon and Best Buy can continue selling the devices until December 25. This limited scope of the ban provides a brief window for consumers to purchase these models from alternative sources in time for Christmas.
Behind the scenes, Apple is actively contesting the ruling and exploring various legal and technical options to ensure the continued availability of its watches. The company argues that the ban could adversely affect both consumers and the broader economy, given the significant revenue generated by Apple's wearables business, especially during the Q1 2023 holiday quarter. Meanwhile, Masimo maintains its stance, viewing the ITC's ban as a strong message about adhering to patent laws.
The Patent Trial and Appeal Board evaluated 17 Masimo patents, invalidating 15, a decision that Masimo is now contesting. During Masimo's trade secret misappropriation trial in May, a judge dismissed half of its 10 claims due to insufficient evidence. Of the remaining claims, a majority of jurors sided with Apple, but with one dissenting, they could not reach a unanimous verdict, leading to a mistrial. A date for a new trial has yet to be set.
Currently, there is no defined duration for the unavailability of Apple Watch Ultra 2 and Series 9. While a veto from the Biden administration remains possible, Apple plans to appeal the ITC's decision with the U.S. Court of Appeals for the Federal Circuit after the Presidential Review Period, starting December 26. This appeal will not postpone the sales and import ban on these models since the disputed Masimo patents are valid until August 2028, but if the court sides with Apple, the company could return its products to the U.S. market. Apple has alternative options, such as negotiating a settlement or a licensing deal with Masimo. Additionally, the company could redesign its smartwatches to bypass the two Masimo patents, possibly by updating Apple Watch's firmware.
It should be noted that the ITC's decision is specific to models featuring the blood oxygen monitoring technology. As a result, the Apple Watch SE, which lacks this feature, remains unaffected and will continue to be available.
The ban's impact is expected to affect Apple's earnings, yet it does not affect Apple Watches already sold or their functionality. Existing models with the blood oxygen sensor, introduced with the Apple Watch Series 6 in 2020, will continue to operate as usual. Furthermore, the ITC's order permits service, repair, or warranty work on units sold before December 25.
