Apple scored a victory on Wednesday when a U.S. appeals court paused a government commission's import ban on some of the company's popular Apple smartwatches following a patent dispute with medical-technology firm Masimo.
The tech giant had filed an emergency request asking the U.S. Court of Appeals for the Federal Circuit to halt the order after appealing the U.S. International Trade Commission's (ITC) decision that it had infringed Masimo's patents.
Masimo declined to comment on the court's decision, while Apple did not immediately respond.
A final decision could cost either company millions of dollars and potentially force a settlement or some kind of technological workaround by Apple, analysts said.
Masimo shares were down almost 4 per cent following the decision, and Apple shares were largely flat.
"This is a big win for Apple that was unexpected by many given the legal issues involved in this patent battle," Wedbush Securities analyst Dan Ives said. "Masimo now has a big fight ahead. We expect an appeals case in January to be a big moment."
In a four-paragraph ruling, the appeals court said it would halt the ban while it considers Apple's motion for a longer-term pause during the appeals process. The court gave the ITC until Jan. 10 to respond to Apple's request.
U.S. President Joe Biden's administration declined to veto the ban on Tuesday, allowing it to take effect. Apple asked for a pause of the ban later that day.
On Tuesday, Apple told the court that U.S. Customs and Border Protection is considering whether redesigned versions of its watches infringe Masimo's patents and can be imported. The customs agency has set a target date of Jan. 12 for its decision, Apple said.
Masimo has accused Apple of hiring away its employees, stealing its pulse oximetry technology and incorporating it into Apple Watches.
The ITC barred imports and sales of Apple Watches with technology for reading blood-oxygen levels. Apple has included a pulse oximeter feature in its smartwatches starting with its Series 6 model in 2020.
Apple can also now sell the Series 9 and Ultra 2 smartwatches in the U.S., after pausing sales last week due to the ITC decision. The watches had remained available at other retailers including Amazon, Best Buy, Costco and Walmart.
The ban did not affect the Apple Watch SE, a less-expensive model without a pulse oximeter. Previously sold watches also were not be affected by the ban.
If the import ban remains in place, it could cost Apple from high hundreds of millions of dollars to very low billions of dollars, Ben Bajarin, CEO of analyst firm Creative Strategies, said before the decision was announced.
"Going forward, it's absolutely certain they are going to have to take a different approach in future hardware to still enable this feature," he said of Apple.
A jury trial on Masimo's allegations against Apple in California federal court ended with a mistrial in May. Apple has separately sued Masimo for patent infringement in federal court in Delaware and called Masimo's legal actions a "maneuver to clear a path" for its own competing smartwatch.
Apple's wearables, home and accessory business, which includes the Apple Watch, AirPods earbuds and other products, brought in US$8.28 billion in revenue during the third quarter of 2023, according to a company report.
Published with reporting by Max Cherney and Aditya Soni.
