By Blake Brittain
WASHINGTON (Reuters) -Apple cannot sell two flagship Apple Watch models in the U.S. as the iPhone maker fights a legal battle over patents covering a blood oxygen measurement feature, an appeals court ruled on Wednesday.
The legal fight could take a year and analysts expect Apple to disable the disputed feature in the meantime to comply with the ban and keep the watch on sale.
Apple shares were down 0.5% to $182.65 after the U.S. Court of Appeals for the Federal Circuit ruled the company can no longer sell Series 9 and Ultra 2 Apple Watches with the blood oxygen feature at the center of a wide-ranging legal battle with medical technology company Masimo.
The affected watches cannot be imported starting at 5 p.m. on Jan. 18 while Apple appeals a December decision by the U.S. International Trade Commission to halt imports of the devices. Apple Watches comprise about a quarter of the global smartwatch market, according to Counterpoint Research.
Separately, U.S. Customs and Border Protection on Jan. 12 determined that a proposed redesign from Apple would allow it to import reconfigured versions of its latest Series 9 and Ultra 2 Apple Watches without violating the ITC’s restrictions, court filings show.
Apple has not yet described the redesign publicly, which could involve an update to the watches’ software.
Ben Bajarin, chief executive of analyst firm Creative Strategies, said Apple likely will disable the blood oxygen features on its Series 9 and Ultra 2 Apple Watch models rather than stop selling them.
The legal proceedings only affect sales in the U.S. Apple does not break out Apple Watch or U.S. sales figures specifically, but got about 42% of its overall revenue from North America last year.
While Apple Watch sales are far smaller than those of Apple’s flagship iPhone, the device anchors the company’s wearables sales segment, which accounted for $39.84 billion of Apple’s overall $383.29 billion in sales for fiscal 2023.
Representatives for Apple and Masimo did not immediately respond to requests for comment on the decision.
The ITC’s import ban on Series 9 and Ultra 2 Apple Watches briefly went into effect on Dec. 26. The Federal Circuit lifted the ban on Dec. 27 while it considered Apple’s request for a long-term pause, and Apple resumed sales of the smartwatches later that day.
Masimo has accused Apple of hiring away its employees and stealing its pulse oximetry technology to use in Apple Watches. The ITC barred imports and direct Apple sales of Apple Watches that read blood-oxygen levels following a Masimo complaint.
Apple stopped selling its latest Series 9 and Ultra 2 watches in the U.S. before Christmas until the appeals court’s temporary pause. The devices remained available from other U.S. retailers including Amazon.com, Best Buy, Costco and Walmart.
Apple asked the Washington-based Federal Circuit to keep the ban on hold for the duration of the appeals process, which is likely to take months. It argued that it was likely to win its appeal and that keeping the ban in effect would harm the company, its suppliers and the public.
The commission countered that Apple’s arguments “amount to little more” than a patent infringer “requesting permission to continue infringing.”
Apple has included a pulse oximeter feature in smartwatches since its Series 6 Apple Watch in 2020. It has countersued Masimo for patent infringement, calling Masimo’s legal actions a “maneuver to clear a path” for its own competing watch.
An Apple company report said its wearables, home and accessory business, which includes the Apple Watch, AirPods earbuds and other products, brought in $8.28 billion in revenue during the third quarter of 2023.
(Reporting by Blake Brittain in WashingtonEditing by David Bario and David Gregorio)
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