Apple Eyes Long-Term Software Fix for Watch While Appealing Ban
(Bloomberg Law) -- Apple Inc., facing a ban on imports of its watches that generate billions in annual sales, is seeking alternate paths to overcome the patent-infringement loss that forced the most popular Apple Watch models off shelves over the holidays.
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The Cupertino, Calif.-based tech giant won a temporary reprieve from a federal appeals court Wednesday, two months after the US International Trade Commission ruled the smartwatches infringed patents held by medical-device maker Masimo Corp.—and one day after the device’s US sales halted. The Apple Watch Series 9 and Ultra 2 returned to Apple’s US retail stores, and will be available online by noon Pacific Time on Thursday, the company said.
Winning the brief stay fulfilled one part of Apple’s multi-pronged approach to recover from the ITC’s decision. Apple’s plans for a comprehensive solution to the patent fight also include redeveloped software now submitted to a US customs agency that could allow it to sell noninfringing versions of the devices as soon as Jan. 12, all while continuing to appeal the ITC loss.
Apple is “working desperately” to pull all available levers “to try and procedurally shut down the ITC by getting a stay from somebody,” said Smith R. Brittingham IV, who leads the ITC litigation practice at Finnegan, Henderson, Farabow, Garrett & Dunner LLP.
A Christmas Day deadline passed without the Biden administration vetoing the ITC’s orders after its late-October finding that certain Apple Watch models infringe Masimo’s patents. Apple quickly appealed to the Federal Circuit to review the ITC’s findings and overturn its orders. It also filed an emergency request to pause enforcement of the ITC’s ban until its motion for a full stay pending appeal is resolved. The Federal Circuit gave the ITC until Jan. 10 to respond to Apple’s request for a stay that would last for the duration of the company’s appeal. For now, though, the agency’s decision and import ban still stand, but enforcement of them is on pause.
Oral arguments in Apple’s case before the exclusion order enforcement branch of US Customs and Border Protection are set for Thursday.
Apple’s pursuit of a software workaround is distinct from its legal efforts to reverse the ITC’s decision. The ITC said that a victory before the Customs tribunal would only reinforce the court’s original decision.
“That forthcoming Customs decision on the redesigns has no bearing on the status of the infringing Apple Watch products, and in fact, a favorable decision by Customs would further undermine any assertion of irreparable harm,” the ITC told the Federal Circuit in a Dec. 26 letter responding to Apple’s filings.
The timeline for a patent-related appeal at the Federal Circuit typically ranges from about a year to a year-and-a-half. A stay of the ITC’s orders for the appeal’s duration, if granted, would likely take longer than Apple often does to develop and release next generations of its devices—even as the company continues to fight for the viability of the banned products.
This scenario is “pretty unusual,” said Nicholas Matich, a lawyer at McKool Smith PC and former acting general counsel for the US Patent and Trademark Office. Matich openly wondered why Apple hasn’t simply paid Masimo to end a dispute that’s stalled sales of its flagship wearable.
“When you’re dealing with a large, sophisticated defendant like Apple, then they’re much more likely to just say, ‘It’s not worth the business disruption. Let’s do a deal,’” Matich said. “Apple has just, for whatever reason, decided that this is the approach that they want to take now.”
Apple might be “throwing a line in the sand,” he said, to show patent owners that “even if you get an injunction against us, we’re never settling with you.”
Apple also has a pair of pending cases in Delaware district court accusing Masimo’s W1 watch of infringement.
“Apple is definitely throwing its weight around in every forum to beat out a much smaller company,” Matich said.
When the ban became effective on Dec. 26—six days after the ITC denied its request to delay the orders for the duration of the appeal—Apple asked the Federal Circuit to step in. The appeals court’s pause granted Wednesday is likely to last about three weeks, ending around the time of Customs’ expected Jan. 12 ruling on the redesigned products.
“Those are the two things that you’re doing all the time,” Brittingham said of Apple’s parallel legal and software solutions to their patent problem. “And if you’re doing your job, as Apple’s counsel clearly are, you need to try and keep them both alive. You try and win, and if you don’t win, you try and win the second way, which is keep doing business even though they issued that injunction,” he added.
Brittingham said any workarounds “probably can be done with software or firmware, and maybe even could be done over the air so that you could sell the ones you already have on the shelves.” Central to the patent fight is technology used to measure oxygen in a user’s blood. A forced automatic download of a software patch disabling the pulse-oximetry feature, he said, might provide Apple a path to re-activate the technology should it win its appeal.
“I think they’re doing it just as a matter of course because they can and many times companies prefer to at least try everything,” Brittingham said of Apple’s multi-pronged efforts. Apple might want to “keep the status quo in place until they know what Customs is going to say. Because if Customs comes back and says, ‘Actually, your new watches still infringe,’ then they’re kind of stuck—unless they come up with a new redesign—waiting out the year for the appeal, which is a whole different bag of snakes.”
If Apple doesn’t get a favorable ruling on its redesigned devices from Customs, he said, it can appeal to the US Court of International Trade. That court’s decision could ultimately also be appealed to the Federal Circuit.
An “interesting sort of hole in the system,” Brittingham said, “is that Masimo as the patent holder cannot appeal a decision from Customs to the Court of International Trade.” That’s because Masimo isn’t actually a party to the Customs dispute.
“If Apple gets what they want, and Masimo thinks it’s terribly wrong, they’ve got nowhere to go,” he said.
Masimo could launch a fresh ITC petition alleging Apple violated the agency’s ban, Brittingham said, but it would have to prove the approved redesigns still infringe.
“It could never end,” he said.
To contact the reporter on this story: Christopher Yasiejko in Philadelphia at cyasiejko@bloombergindustry.com
To contact the editors responsible for this story: James Arkin at jarkin@bloombergindustry.com; Kartikay Mehrotra at kmehrotra@bloombergindustry.com
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