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Apple

Apple to Fight Watch Ban in Court After White House Declines to Act

user avatar Author: Editors Desk Source: Bloomberg
December 26, 2023 at 15:23
Photo by Amelia Holowaty Krales / The Verge
Photo by Amelia Holowaty Krales / The Verge

Trade rep says decision was made after ‘careful consultations’

Apple Inc., seeking to defend a business that generates roughly $17 billion a year, is appealing a US sales ban of its smartwatches after the White House refused to overturn the measure.

Apple will challenge the ban — imposed by the US International Trade Commission over a patent dispute — at the US Court of Appeals for the Federal Circuit. On Tuesday, the company also filed an emergency motion seeking to lift the prohibition on watch sales while the court considers its appeal.

A patent dispute with medical technology maker Masimo Corp. has put Apple in the rare position of fighting to get one of its signature products back on store shelves. The ITC determined in October that Apple violated two Masimo health-technology patents with a blood-oxygen sensor in its watches. The White House had 60 days to review the import ban, with the decision resting with US Trade Representative Katherine Tai. The time on that review just ran out.

“After careful consultations, Ambassador Tai decided not to reverse the ITC’s determination and the ITC’s decision became final on December 26, 2023,” the Office of the US Trade Representative said Tuesday in a statement.

Apple had already stopped selling its Series 9 and Ultra 2 watches in its online store and US retail outlets ahead of the review’s Tuesday deadline. Online sales were halted last Thursday, and the last day to buy a new watch at an Apple retail store was on Christmas Eve.

“We strongly disagree with the USITC decision and resulting exclusion order, and are taking all measures to return Apple Watch Series 9 and Apple Watch Ultra 2 to customers in the US as soon as possible,” an Apple spokeswoman said.

The order against Apple includes a sales ban at its own retail channels as well as a prohibition on importing the devices into the US. Other retailers, such as Buy Buy Co., Target Inc. and Walmart Inc., can continue to to sell the products — at least until supplies run out.

The Series 9 and Ultra 2 models account for most of Apple’s watch sales. The lower-end Apple Watch SE, which doesn’t include the blood-oxygen feature, remains on sale.

Apple told staff last week that due to the legal battle, they’re not allowed to tell customers the Ultra 2 and Series 9 remain on sale through non-official Apple retail channels.In a potential headache for owners of the Apple Watch Series 6, 7 and 8 — all of which include the blood-oxygen feature — out-of-warranty watches won’t be eligible for hardware repairs until the ban is lifted. Apple has developed a software update for the Apple Watch that it believes will mitigate the issue. It has submitted the design of that update to the US customs agency and hopes for approval next month to get the device back on sale.

The timing of the ban means the measure probably won’t have a major impact on the company’s holiday season results. It’s likely that most people completed their shopping prior to Christmas, and some may have rushed to buy watches after Apple began warning in recent days that the ban was coming.

Investors have largely taken the episode in stride. Apple shares were little changed on Tuesday, at $193.01 as of 2:43 p.m. in New York. The shares are up 49% this year and reached a record high earlier this month.

Read More: S&P 500 Trades Within a Whisker of All-Time High

Apple, based in Cupertino, California, added the blood-oxygen sensor to its watches in 2020 with the Series 6. Masimo sued Apple that same year, alleging that the iPhone maker violated several of its health technology patents and that stole its trade secrets. After meeting with Masimo in 2013, Apple hired more than 20 of its engineers, including its chief medical officer.

In 2021, after the Series 6 went on sale, Masimo complained to the ITC and sought the injunction. The iPhone maker countersued Masimo in 2022, alleging that the medical device company stole the design of the Apple Watch for its own W1 device. The Masimo product, like Apple’s, has a square front and uses a round, puck-shaped inductive charger.

The White House didn’t heavily publicize the dispute ahead of Tuesday’s statement, but has made antitrust enforcement one of its central policies — with President Joe Biden saying regularly that competition is a pillar of healthy economies.

The US president has authority to intervene and stop import bans, though such actions are rare. In 2013, President Barack Obama vetoed an import ban on some iPhone and iPad models. But that dispute was with South Korea-based Samsung Electronics Co., while Masimo is a US corporation.

Joe Kiani, Masimo’s chief executive officer, said he’d be willing to settle with Apple to end their dispute, but that the company hasn’t been interested. “It takes two tango,” he said on Bloomberg Television last week.

A prolonged ban would hit one of Apple’s biggest moneymakers at a difficult time. Already, the company has been struggling to pull out of a sales slump. Heading into the holiday season, Apple revenue had dropped for four straight quarters, the longest such streak in two decades.
 

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