What a year it’s been for Masimo Corporation (NASDAQ: MASI), the manufacturer of medical products sold largely to hospitals and other healthcare systems who is also the owner of Sound United, a leading manufacturer of audio products. Simply saying they’ve been through highs and lows would understate the high drama in which the company has been immersed this past year – not the least of which is embodied by its deathmatch with Apple, Inc., the largest company in the world. Apple is also regularly ranked as the most profitable company in the world – a well-resourced adversary to engage thoughtfully…and carefully.
Some impressive early Masimo wins in this battle with Apple, however, seemed to suggest that the tech behemoth was losing its balance and the altercation might be winnable by its much smaller rival. But then…
But then the wind shifted, and recent events suggest it’s a foul wind indeed…
Long-time readers of Strata-gee know that I’ve followed a couple of tech industry legal battles closely as I believe the outcomes could have a wider impact on the entire industry. They are both David vs. Goliath-type stories where a smaller rival has taken on an industry giant with the likelihood of success seeming remote. One of those cases is Sonos vs. Google…which is ongoing. The other is Masimo vs. Apple which is also ongoing.
Had Lots to Be Thankful For at the End of 2022
November 22, 2022 – Back at the end of 2022, Masimo had the first of what would become a string of impressive wins with a win in a case many ignored – Masimo vs. True Wearables – which turned out to be a bit of a proxy win against Apple. You see, True Wearables was a company started by Dr. Marcelo Lamego, an ex-employee of Masimo who left to go to work for Apple. After eventually leaving Apple, he started True Wearables and – according to Masimo’s allegations – proceeded to misappropriate proprietary Masimo pulse oximetry technology in a new line of sensors targeted at the personal exercise and sports market called Oxxiom. The judge banned Oxxiom and it was pulled from the market.
The judge in that case, found that Dr. Lamego did in fact steal Masimo trade secrets, and that the True Wearables line infringed on its patents. Since Dr. Lamego had previously helped Apple include pulse oximetry technology into several Apple Watch models, this True Wearables win by Masimo boded well for the upcoming battle with Apple.
Starting Off the Year on the Right Foot, ITC Finds Infringement by Apple
January 12, 2023 – Then, less than 60 days later, more good news for the company emerged. The United States International Trade Commission (ITC), after a long and deep investigation, determined that certain models of the Apple Watch infringed on at least two Masimo patents on pulse oximetry. The decision keyed another process to determine the appropriate penalty but certainly registered a HUGE win for Masimo’s legal efforts against the giant company.
I don’t think even Apple saw that decision coming. In reaction, it mounted a furious effort to appeal or modify the decision. And even though it would take some time for the ITC to issue its final decision and penalty, one thing that apparently did NOT come up as a solution for Apple, was to negotiate some kind of royalty arrangement with Masimo. What is that…sour grapes? [We saw the same thing in Sonos vs. Google where Google literally chose to retroactively – and quietly – disable features in their Smart Speakers that were determined to be based on Sonos patents through a firmware update…rather than offer Sonos a royalty. Sheesh…]
It would take the ITC quite a while to decide how to remedy the situation – reported on October 27, 2023 – but it delivered quite the final decision. The ITC banned the importation of all Apple Watch models that include the infringing technology in violation of U.S. Trade laws and further issued a Cease and Desist order preventing Apple from selling existing Apple Watch inventory of the infringing models.
PTAB Dismisses Apple Action Against Masimo Patents
February 1, 2023 – Literally days after the initial ITC decision, Masimo had another win handed to them when the Patent Trial and Appeal Board (PTAB) dismissed Apple’s petition for an inter partes review on two separate Masimo patents. Such a review could result in patents being deemed invalid, which would have been a win for Apple.
The tech giant literally challenged 30 claims on the two patents and asked the PTAB for a trial on the matter. However, that request was dismissed by the Board, keeping both Masimo patents in full force.
Will April Showers Bring May Flowers? District Court Battle Commences
April 5, 2023 – On this day in April, a trial commenced between Masimo and Apple in the U.S. District Court, Central District in Southern California, before Judge James V. Selna. I’m sure Masimo lawyers and executives were really excited when they heard which judge was assigned to this case, as Judge Selna was the same judge who found in their favor in the True Wearables case.
But in this matter, we found a much more skeptical Judge Selna who ended up dramatically trimming Masimo’s claims back by almost half. Many dramatic new facts were exposed in this trial, including the extent to which Apple went in order to lure Masimo employees to leave the company and come to work for Apple with generous pay and stock packages – dozens chose to take their offer.
TURNING POINT: Then…The Wind Shifts
May 2, 2023 – However, in what may have been the turning point where the wind shifted and Masimo began running out of luck, in early May the trial with Apple ended with a hung jury, and Masimo vs. Apple was dismissed by Judge Selna. It wasn’t a loss for Kiani, but it wasn’t a win either. However, what it surely must have been…was a big disappointment for CEO Joe Kiani and his legal team.
A local reporter revealed that six of the seven jurors had voted in favor of the defense, in this case, Apple. Just one juror, it seems, sided with Masimo…an ominous sign. Masimo has vowed to retry the case, but it surely must be a bit chastened at this point.
Important New Events That Transpired Since Those Above
September 2023 – In what can only be seen as a troubling (massive?) defeat for Masimo, A Federal Circuit Court sided with Patent Trial and Appeal Board decisions in favor of Apple. The PTAB had previously issued decisions invalidating claims in 13 Masimo patents. The patents involved were for technology related to measuring the contents of blood – part of its overall dispute with Apple over its Watch line.
Masimo had appealed the PTAB decisions with the Federal Circuit Court which, unfortunately for them, concurred with PTAB and Apple.
November 2023 – The Delaware Court of Chancery grants an award of $17.8 million to Politan Capital Management and Politan Capital NY LLC for attorneys’ fees and other expenses. What is this about? Throughout 2023, Masimo was engaged in a nasty proxy battle with Politan Capital Management, an activist investment group. Politan felt Masimo had lost its way – as evidenced by the dramatic drop in value in Masimo stock after it acquired Sound United in February 2022. Politan CEO Quentin Koffey bought a 9% stake in Masimo and demanded two seats on the company’s board of directors.
Masimo fought to repel the efforts of Politan. After a long and nasty proxy battle, that included lawsuits between Politan and Masimo, investors sided with Politan and elected its two candidates for director slots on the Board. Adding insult to injury, the Delaware Court awarded Politan full restitution for its legal fees in suing Masimo.
November 2023 – Also in November, Masimo was dealt another disappointing blow as the PTAB denied Masimo petitions for inter partes reviews of two Apple patents. One of these was a utility patent for a wearable electronic device, the Apple Watch. And the other was a design patent for a charger for the Apple Watch.
Apple has accused Masimo’s relatively new health-centric smartwatches of infringing on these patents. With those patents fortified, Apple is free to move forward on its actions against Masimo.
Looking Forward to 2024
I would imagine the good folks at Masimo are looking forward to 2024. Perhaps, in the new year, the wind will change again and the company will have a shot at regaining more positive momentum.
It’s going to need it because I see no signs of Apple slowing down in its war with Masimo.
Learn all about Masimo and its extensive line of products at masimo.com.
See more on Apple at apple.com.
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