In response to ongoing patent litigation with California-based health monitoring technology company, Masimo Corporation, Apple Inc. has made the decision to cease sales of its latest smartwatch models, the Apple Watch Series 9 and Ultra 2, in the United States. The move, effective from 21 December 2023 online and Christmas Eve at physical retail locations, comes in the wake of a ruling by the International Trade Commission (ITC) in October this year. The ITC found Apple in violation of Masimo patents related to the calculation of blood oxygen saturation in the Apple smartwatches.
While an appeal of the ITC ruling is currently underway, with a December 25 deadline, Apple is taking proactive measures to comply with the ruling, should the ruling stand. The company is actively working on modifying the technology in question, specifically the software algorithms responsible for blood oxygen level measurement. This contested feature forms the crux of the patent dispute initiated by Masimo. However, hardware claims of some of the disputed Masimo patents may pose challenges for a quick resolution through such a software update, leaving uncertainties about the timeline for device redesign if the appeal proves unsuccessful.
The engineering effort to make these modifications is a high-stakes undertaking for Apple, particularly during the critical holiday season. The ITC ruling, unless overturned by a last-minute veto, prompted Apple to take the swift action. While settling with Masimo is an option, Apple is currently prioritising the technological adjustments and regulatory compliance.
It's worth noting that Apple, in a countermove, filed a pair of lawsuits against Masimo last year. The lawsuits filed by Apple accused Masimo of infringing several Apple patents, adding a layer of complexity to the overall dispute.
The affected models, Series 9 and Ultra 2, constitute a substantial portion of Apple's watch sales, contributing significantly to the company's Wearables, Home, and Accessories business, which generates over $40 billion annually. Analyst estimates suggest the Apple Watch alone made about $17 billion in fiscal 2023. The sales halt may also impact older models, including the Series 8, sold in refurbished condition on Apple's website. However, Apple has assured customers that there will be no impact on watches already sold, and the lower-end SE model, lacking the contested blood oxygen feature, will remain available.
This unprecedented move by Apple, coupled with the ongoing patent litigation, underscores the significance of the patent dispute and its potential impact on the company's financial performance. As the situation unfolds, we will watch closely to see how this high-profile conflict will shape the future of smartwatch technology and the related intellectual property rights.
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