Masimo wins $634M verdict in Apple spat, ITC mulls import ban

Masimo

(Nasdaq: MASI)
+
today scored a significant legal victory over Apple in the latest installment of the long-running legal battle between the two companies.

A federal jury in the U.S. District Court for the Central District of California awarded the Irvine, California-based home health monitoring technology developer $634 million, siding with Masimo on four patents related to pulse oximetry that it claimed Apple had infringed. The $634 million sum was the low end of a range proposed by Masimo that went as high as $749 million, according to legal documents.

In a statement, Masimo said the verdict confirmed the validity of its Patent No. 10,433,776. It found that Apple infringed this patent, and awarded Masimo hundreds of millions of dollars in damages.

The company’s statement reads:

“We are pleased by this outcome, and appreciate the time and attention given to our case by the court and the jury. This is a significant win in our ongoing efforts to protect our innovations and intellectual property, which is crucial to our ability to develop technology that benefits patients. We remain committed to defending our IP rights moving forward.”

More on the ongoing legal battle between Masimo and Apple

While Apple reportedly plans to appeal the decision, there could be further ramifications, as the International Trade Commission (ITC) will now consider a potential import ban on Apple Watches, according to Reuters.

Apple only announced plans to introduce a redesigned Blood Oxygen feature for some users of its Apple Watch devices in August. This came nearly two years after the tech giant paused sales of certain watches amid a patent dispute with Masimo.

The patent spat goes back as far as January 2020, centering around light-based pulse oximetry technology used by the smartwatches made by both companies. Masimo develops a number of technologies that use pulse oximetry, including its FDA-cleared W1 smartwatch.

A turning point in the dispute arrived in October 2023 when the ITC ruled in Masimo’s favor. The commission recommended a limited exclusion order for infringing Apple Watches with light-based pulse oximetry functionality. It found that Apple violated U.S. laws by incorporating this patented technology in its products. The battle continued last fall, with both companies claiming victories in their spat.

The ITC said it plans to investigate the redesigned Apple Watches. It aims to evaluate whether they may circumvent its previous ban and still infringe Masimo patents.

Masimo sued Customs over Apple’s August approval. Meanwhile, Apple has a complaint in the Delaware District Court set for trial at a later date.

The analysts’ take

BTIG analysts Marie Thibault, Sam Eiber and Alexandra Pang maintain a “Buy” rating for Masimo following the verdict.

“This is a positive turn for the MASI-AAPL litigation and though an Apple appeal would postpone any payment, we view this legal win as a call option for MASI,” the analysts wrote.

They expect shares to move higher on Monday as investors see the potential for a positive resolution. Additionally, while the analysts say the ITC could seek to determine whether it should exclude Apple’s redesigned watch under its current limited exclusion order, they note that Masimo is not seeking civil penalties. The analysts cite reports suggesting that the investigation could conclude within six months.

With multiple types of litigation ongoing between the companies, the analysts view the latest news as a potential tide-turner in the battle.

“We think the pendulum has clearly swung toward [Masimo] in these legal fights,” the analysts wrote. “We think this may increase the chances of a positive resolution for [Masimo], whether a settlement between the two parties, a move to start negotiations, or some kind of monetary-based agreement.

Mike Matson, senior research analyst at Needham & Co., said the expected Apple appeal could delay the payment award by up to 2 years. He wrote that the verdict “further reinforces the strength of MASI’s intellectual property.”