Apple has been ordered to halt sales and imports of its latest Apple Watch models in the US due to an ongoing patent dispute with medical device maker Masimo Corp. The ban goes into effect on December 25th and impacts the recently launched Apple Watch Series 9 and Apple Watch Ultra 2.
Background of the Dispute
The patent dispute dates back to 2020, when Masimo sued Apple for infringing on its patents related to blood oxygen monitoring technology. Specifically, Masimo has patents covering techniques for accurate noninvasive monitoring of blood oxygen saturation levels.
Apple’s watches use pulse oximetry sensors to measure blood oxygen levels. This feature was introduced with the Apple Watch Series 6 in 2020. Masimo alleges that Apple’s implementation infringes on its patents.
In November 2022, the U.S. International Trade Commission (ITC) ruled that Apple infringed on Masimo’s patents and banned imports of the Series 8, SE 2 and Ultra watches. Apple was able to avoid disruption for the 2022 holiday season by releasing software updates that disabled the blood oxygen app on those models.
However, that workaround does not apply to the next-generation Series 9 and Ultra 2 models, which were found to still be infringing. Hence, the ITC has now banned import and sales of those watches in the US.
Impact of the Ban
The ban on the latest models comes right before the busy holiday shopping season, which could significantly impact Apple’s watch sales and revenue.
Apple does not breakdown watch sales specifically, but wearable products including watches are a growth category for the company. In 2022, Apple reported over $13 billion in wearables revenue for its fiscal Q4 (which includes the holiday season).
| Category | Q4 2022 Revenue | Growth |
|---|---|---|
| iPhone | $42.6 billion | 9% |
| Mac | $11.5 billion | -22% |
| iPad | $7.2 billion | -13% |
| Wearables/Home/Accessories | $13.5 billion | 10% |
| Services | $20.8 billion | 5% |
Apple Q4 2022 revenue by product segment [Source: Apple]
The watch ban is estimated to impact around half of Apple’s smartwatch sales. Losing a chunk of sales during the peak holiday quarter could significantly reduce Apple’s wearables revenue.
Analysts estimate the ban could impact $17 billion to $20 billion in Apple Watch sales annually if it remains in place long-term. Needless to say, Apple is motivated to find a resolution quickly.
Apple’s Response and What’s Next
Apple said it plans to appeal the ITC’s ruling while continuing to negotiate with Masimo. Apple can also request a stay order to suspend the import ban while the appeal is considered.
For now, Apple has pulled Series 9 and Ultra 2 listings from its online store in the US. However, the watches remain on sale at third party retailers for the time being.
Apple is likely working on additional software updates to modify features and hopefully allow it to resume sales. But any changes would need to be reviewed by the ITC, which is why the company has not been able to avoid the ban on its newest watches.
Meanwhile, Masimo’s CEO said he remains open to settling, noting that Apple is a “great company” that makes “great products.” This indicates there may be a licensing deal or some other resolution possible.
In the past, Apple has been unwilling to pay licensing fees and has fought vigorously against patent claims. But with billions in sales impacted, the company may need to come to an agreement this time.
The patent dispute highlights risks for tech product makers reliant on certain features. It also illustrates how non-practicing entities that focus on licensing can have major impacts. For consumers, it creates uncertainty around the availability Apple’s latest watches heading into the holidays.
Both companies have incentives to reach a compromise. But the legal process can be lengthy, meaning Apple Watch sales and imports could potentially remain blocked for months absent a preliminary deal. Apple may also pursue software tweaks and legal appeals to try and resume sales while negotiations carry on.
To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.
