Apple to Remove Blood-Oxygen Tool to Circumvent US Watch Ban, US Customs Decides

Apple can use a redesign to bypass its import ban on Apple Watch Series 9 and Ultra 2, according to US Customs and Border Protection, which is in charge of enforcing import bans. The customs agency determined on Jan. 12 that the company’s proposed redesign to remove the blood-oxygen feature “falls outside the scope” of the import ban decided by the US International Trade Commission (ITC) concerning intellectual property litigation with Masimo, according to a disclosure from Masimo’s Lawyers.

“In Apple’s request under 19 C.F.R. Part 177 (in a portion it did not identify as confidential), Apple explained ‘that its Redesigned Watch Products definitively (i) do not contain pulse oximetry functionality…’” the lawyers wrote. “Because Apple has maintained that certain information in the EOE proceeding is confidential, Masimo does not provide a copy of the decision with this letter. Currently, no public version of the decision exists.”

The announcement comes after the ITC ruled in October to uphold a judge’s previous decision that found Apple had violated rights held by Masimo in light-based technology for reading blood-oxygen levels. In litigation that began in 2020, Masimo alleged the company stole its intellectual property and incorporated it in several Apple Watch models.

The ruling in Masimo’s favor took effect after a 60-day presidential review period which ended Dec. 26, 2023, after the Biden administration declined to veto the ITC decision. The import ban only lasted a day before Apple convinced a US appeals court to pause it while the federal circuit considers whether the appeal should put the ITC’s decision on hold.

In a drastic step by the company, Apple’s software workaround will remove the pulse oximetry feature in its newest watches. Apple engineers have also been working on a software update the changes the blood-oxygen app and its algorithms in a way to sidestep the ban without losing the feature entirely. However, eliminating the capability is likely the quickest way to avoid seeing the ban reinstated, according to The Mercury News.

The tech giant has already begun shipping the modified Series 9 and Ultra 2 watches to retail locations in the US and has told stores to not open or sell changed devices until approved by Apple’s corporate offices.

In response to the decision, Masimo’s legal team filed a notice of supplemental authority in the Emergency Stay Motion granted by a Federal Appeals Court which allowed apple to continue to sell its watches while it awaited a decision on whether the ban would be paused throughout the appeals process fighting ITC’s ruling, according to BTIC analysts.

“[Masimo’s] legal team point out in this notice of supplemental authority that the [Customs and Border Protection] decision that the Apple redesign is outside the scope of the ITC's remedial orders eliminates Apple's argument of irreparable harm under those remedial orders,” Marie Thibault and Sam Eiber wrote in the analysis.

The “irreparable harm” statement Masimo highlights comes from an Apple argument which said that allowing the ban to stay in effect would cause significant harm to the company, its suppliers, and the public, according to Reuters.

ITC reserves the right to overrule the customs agency’s decision if it disagrees with it.

In addition to the proposed redesign, Apple is also expected to be in a federal appeals court as early as this week to motion for a continued stay on the ban. Of note, ITC last week urged an appeals court to reject “weak and unconvincing” arguments supporting a bid block the ban’s enforcement.

In light of the news, BTIG analysts raised three important questions: “1) Will customers pay extra for an Apple Watch that has been effectively defeatured and how will this watch version be priced?; 2) Will this [Customs and Border Protection] decision have any impact on the appeal court's decision on a Stay Motion during the appeals process?; and 3) How does this software workaround impact Apple's efforts on future health features?”