US imports of some Apple Watches banned while patent case plays out

WASHINGTON/SAN FRANCISCO — Apple cannot sell two flagship Apple Watch models in the US as the iPhone maker fights a legal battle over patents covering a blood oxygen measurement feature, a US appeals court ruled on Wednesday (Jan 17).

The legal fight could take a year and analysts expect Apple to disable the disputed feature in the meantime to comply with the ban and keep the watch on sale.

Apple shares closed 0.5 per cent lower at US$182.68 (S$245.28) after the US Court of Appeals for the Federal Circuit ruled the company can no longer sell Series 9 and Ultra 2 Apple Watches with the blood oxygen feature at the centre of a wide-ranging legal battle with medical technology company Masimo.

The affected watches cannot be imported starting at 5pm ET (2200 GMT) on Thursday while Apple appeals a December decision by the US International Trade Commission (ITC) to halt imports of the devices. Apple Watches comprise about a quarter of the global smartwatch market, according to Counterpoint Research.

In a statement, Joe Kiani, Masimo's founder and chief executive, said the ruling "affirms that even the largest and most powerful companies must respect the intellectual rights of American inventors and must deal with the consequences when they are caught infringing others' patents."

Apple representatives did not immediately respond to requests for comment on the decision.

Separately, US Customs and Border Protection on Jan 12 determined that a proposed redesign from Apple would allow it to import reconfigured versions of its latest Series 9 and Ultra 2 Apple Watches without violating the ITC's restrictions, court filings show.

Apple has not yet described the redesign publicly, which could involve an update to the watches' software.

Apple's options

Ben Bajarin, chief executive of analyst firm Creative Strategies, said Apple will likely disable the blood oxygen features on its Series 9 and Ultra 2 Apple Watch models rather than stop selling them.

The legal proceedings only affect sales in the United States. Apple does not break out Apple Watch or US sales figures specifically, but about 42 per cent of its overall revenue came from North America last year.

While Apple Watch sales are far smaller than those of Apple's flagship iPhone, the device anchors the company's wearables sales segment, which accounted for US$39.84 billion of Apple's overall US$383.29 billion in sales for fiscal 2023.

The ITC's import ban on Series 9 and Ultra 2 Apple Watches briefly went into effect on Dec 26. The Federal Circuit lifted the ban on Dec 27 while it considered Apple's request for a long-term pause, and Apple resumed sales of the smartwatches later that day.

Masimo has accused Apple of hiring away its employees and stealing its pulse oximetry technology to use in Apple Watches. The ITC barred imports and direct Apple sales of Apple Watches that read blood-oxygen levels following a Masimo complaint.

Apple stopped selling its latest Series 9 and Ultra 2 watches in the US before Christmas until the appeals court's temporary pause. The devices remained available from other US retailers including Amazon.com, Best Buy, Costco and Walmart.

Apple asked the Washington-based Federal Circuit to keep the ban on hold for the duration of the appeals process, which is likely to take months. It argued that it was likely to win its appeal and that keeping the ban in effect would harm the company, its suppliers and the public.

The commission countered that Apple's arguments "amount to little more" than a patent infringer "requesting permission to continue infringing."

Apple has included a pulse oximeter feature in smartwatches since its Series 6 Apple Watch in 2020. It has countersued Masimo for patent infringement, calling Masimo's legal actions a "manoeuvre to clear a path" for its own competing watch.

An Apple company report said its wearables, home and accessory business, which includes the Apple Watch, AirPods earbuds and other products, brought in US$8.28 billion in revenue during the third quarter of 2023.

ALSO READ: Apple offers iPhone 15 at rare discount in China as competition intensifies