You may have a tough time buying a new Apple Watch this year.

What’s Happening with the Apple Watch?

Regular consumers now enjoy a front-row seat to the long-running intellectual property dispute between Apple, the tech giant based in Cupertino, California, and Masimo, a medical device company based in Irvine, California.

Back in January 2020, Masimo sued Apple for patent infringement, trade secret misappropriation, and declaratory judgment of patent ownership in the Central District of California. The patents at issue cover a device (e.g., a smartwatch) that measures a person’s blood-oxygen level using light sensors.[1]

On June 29, 2021, Masimo also filed a complaint under 19 U.S.C. § 1337 (“Section 337” of the Tariff Act of 1930, as amended) against Apple in the United States International Trade Commission (“ITC”) for importing products that infringe five of the patents.[2]

In July-August 2022, Apple responded by filing petitions for inter partes review at the Patent Trial and Appeal Board (“PTAB”) of the United States Patent Office against all twelve of Masimo’s asserted patents, but the PTAB denied the institution of at least some of these petitions.[3]

The ITC ruled in favor of Masimo. On December 26, 2023, limited exclusion and cease and desist orders by the ITC prohibiting the import of certain versions of the Apple Watch went into effect in the United States.[4] The Biden administration subsequently declined an opportunity to veto the ban.[5] However, as is common with litigation, a single unfavorable decision is not the end of the story. Only a day later, on December 27, Apple succeeded in an emergency appeal to the U.S. Court of Appeals for the Federal Circuit to halt the ban.[6] There is now an interim stay on the ban, but there is a chance that the stay will be lifted after a briefing on the emergency motion is complete in the next few weeks.

Apple also submitted to the U.S. Customs and Border Protection a redesign of its watches that ostensibly would avoid infringement of Masimo’s patents. Customs is supposed to weigh in on this redesign by January 12, 2024.[7]

If you are a patent owner who sympathizes with David versus Goliath, you probably are feeling dizzy by now and should check your blood-oxygen levels.

What Is the ITC?

The ITC is an independent and bipartisan federal agency of the United States. It protects trade at the border. Among other issues related to trade, the ITC handles investigations under Section 337 regarding intellectual property violations, such as “allegations of patent infringement and trademark infringement by imported goods” and “misappropriation of trade secrets.”[8]

Section 337 concerns “[u]nfair import” investigations. A patent infringement action under Section 337 requires a complainant to prove that: (1) products are being imported into the United States that “infringe a valid and enforceable United States patent,”[9] and (2) “an industry in the United States, relating to the articles protected by the patent . . . exists or is in the process of being established.”[10] After the complaint is filed, the typical schedule for a Section 337 investigation is as follows:

• The ITC will typically decide whether to institute an investigation within 30 days of the complaint being filed;[11]
• If instituted, an Administrative Law Judge (“ALJ”) will oversee the investigation, which includes discovery, a hearing, and an initial determination, and then the ITC (a different set of people from the ALJ) will issue a final determination that affirms or alters the initial determination;[12]
• As of 2023, a Section 337 investigation typically takes 13 months to complete;[13]
• Any order by the ITC is subject to a 60-day review period by the President of the United States. The ITC’s order becomes final if the President declines to act;[14] and
• Either party may appeal the ITC’s final decision to the United States Court of Appeals for the Federal Circuit.[15]

If the ITC finds a violation of Section 337, the ITC may order certain remedies, which generally comprise: (1) exclusion orders, (2) cease and desist orders, and (3) consent orders.[16] Exclusion orders may be general or limited.[17] A general exclusion order “bars the importation of all violative products, regardless of source, where it is necessary to prevent circumvention of an exclusion order limited to violative products of named persons or when there is a pattern of violation and it is difficult to ascertain the source of the violative products.” [18] By contrast, a limited exclusion order only “bars the importation of products by specific respondents determined by the Commission to be violating section 337.”[19] A cease and desist order precludes an entity from, e.g., continuing to infringe an asserted patent by selling the products in the United States.[20] Under a consent order, an infringer generally agrees to cease the infringing conduct.

How Is the ITC Different Than Federal Courts?

The ITC has unique characteristics that might make it a more favorable venue compared to federal courts for enforcing patent rights in the United States, such as:

• Section 337 investigations are generally much faster than patent litigation in federal court, which can take on average three to five years;[21]
• Discovery is often completed much faster, with only 10 days to respond to discovery requests compared to 30 days in federal court litigation;[22] and
• Exclusion orders and cease and desist orders that prohibit infringing conduct are easier to obtain in the ITC than injunctions in federal court litigation, which are subject to eBay factors and rarely granted.[23]

However, there are some drawbacks:

• A Section 337 investigation is decided by an ALJ, not a jury (although this could alternatively be seen as a benefit, depending on the circumstances);[24]
• Monetary damages are not available as a remedy;
• There is no guarantee that an investigation be instituted – the ITC has complete discretion;[25]
• Final decisions by the ITC have no preclusive effect, meaning someone like Masimo does not automatically win its federal court case just because it won in the ITC;[26] and
• While rare, geopolitical considerations may affect the outcome.[27]

Concluding Thoughts

Masimo’s dispute with Apple highlights the less widely known avenue for pursuing patent infringement claims at the ITC. While not always an option, filing a complaint under Section 1337 at the ITC offers many potential advantages to patent owners compared to litigation in federal court.

[1] Masimo Corp. et al. v. Apple Inc., CDCA-8-20-cv-00048 (Masimo’s claims for trade secret misappropriation and declaratory judgment of patent ownership are based on Apple’s hiring of an ex-Masimo employee in 2014 who had significant knowledge of Masimo’s technology). Apple later sued Masimo for patent infringement over Masimo’s release of its own smartwatch. Apple Inc. v. Masimo Corporation et al., D.Del. 1:22-cv-01378 and D.Del. 1:22-cv-01377.

[2] https://ipwatchdog.com/wp-content/uploads/2023/01/745713-1647177.pdf.

[3] E.g., IPR2022-01271, IPR2022-01272 (relating to Masimo’s U.S. Patent No. 10,912,501); see also https://www.strata-gee.com/masimo-wins-again-patent-trial-appeal-board-dismisses-apple-challenge/.

[4] https://www.usitc.gov/system/files?file=secretary/fed_reg_notices/337/337_1276_notice10262023sgl.pdf.

[5] https://www.law360.com/corporate/articles/1780141/white-house-won-t-veto-itc-apple-watch-import-ban?about=corporate. These bans are rarely vetoed. https://www.law360.com/articles/1561176.

[6] https://www.pacermonitor.com/view/I6WOXQI/Apple_Inc_v_ITC__cafc-24-01285__0019.0.pdf?mcid=tGE3TEOA.

[7] https://www.cnn.com/2023/12/26/tech/apple-watch-ban/index.html.

[8] https://www.usitc.gov/intellectual_property.htm

[9] 19 U.S.C. § 1337(a)(1)(B)(i).

[10] 19 U.S.C. § 1337(a)(2).

[11] 19 C.F.R. § 210.10(a).

[12] https://www.usitc.gov/intellectual_property/documents/section337_rules.pdf.

[13] https://www.usitc.gov/intellectual_property/337_statistics_average_length_investigations.htm.

[14] 19 U.S.C. § 1337(j).

[15] Id.

[16] See 19 C.F.R. § 210.75.

[17] https://www.usitc.gov/press_room/defining_moment_exclusion_order.

[18] Id.

[19] Id.

[20] https://www.usitc.gov/glossary/term/cease-and-desist-order.

[21] https://legal.thomsonreuters.com/blog/patent-litigation-101/.

[22] Compare 19 C.F.R. §§ 210.27 – 210.34 with Fed. R. Civ. P. 26-37.

[23] https://ipwatchdog.com/2020/02/06/obtaining-injunctions-ebay-versus-international-trade-commission/id=118576/.

[24] https://www.usitc.gov/intellectual_property/documents/section337_rules.pdf.

[25] 19 C.F.R. § 210.10(a).

[26] Tex. Instruments, Inc. v. Cypress Semiconductor Corp., 90 F.3d 1558, 1569 (Fed. Cir. 1996).

[27] E.g. https://www.theverge.com/2013/8/3/4585700/president-obama-vetoes-samsung-patent-ban-on-iphone-4-and-select-ipads (describing President Obama’s veto of the ITC’s import ban on Apple iPhones in a dispute against Samsung in 2013).

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