December 25th, marked the deadline for President Biden to reject the U.S. International Trade Commission’s (USITC) ruling banning imports of certain Apple Watch models. With no action from the White House, Apple now faces a federal government order to halt imports and sales of Apple Watch Series 9 and Ultra 2 devices because it incorporates light-based pulse oximetry technology covered by the claims of Masimo’s U.S. Patent Nos. 10,945,648 (claims 24 and 30) and 10,912,502 (claim 22).

    Historically courts regularly issued injunctions to protect the patent monopoly. However, injunctive relief has become much rarer following the after the landmark case of eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006), where the Supreme Court found no presumption of injunctive relief even against adjudged patent infringers. Rather, before an injunction can issue, a patentee must show that money damages are insufficient and that it will suffer irreparable harm due to any ongoing infringement.  But, eBay only applies in district court cases, and does not apply to USITC decisions. In fact, injunction (via exclusion order) is the agency’s primary form of relief granted.

    In early 2023, an ITC administrative law judge (ALJ) issued its initial determination that Apple was in violation of Section 337 of the 1930 Tariff Act by importing/selling the watches using.  The ALJ sided with Masimo on the ‘648 patent, but sided with Apple on four other patents.  Of course, one claim is all you need to show infringement. In October, the ITC Commissioners largely agreed with the ALJ and issued its exclusion order. Under the statute, the exclusion order then goes to the US President who has power to veto the the exclusion order.  That timeline ended on December 25 and the exclusion order is no in effect, with Homeland Security (Customs & Border Patrol) authorized to take enforcement action if needed.

    In its emergency appeal filed December 26, Apple argues the ITC erred in several ways, including by finding that Masimo had established a domestic industry related to the ‘648 patent at the time its complaint was filed.  (Existence of a domestic industry is a prerequisite for the USITC to take action).  Apple claims Masimo failed to provide any actual devices practicing the ‘648 patent when requested during discovery. Apple also argues the ITC improperly required the prior art to enable more than the ‘648 patent claims require to invalidate the claims.

    Here, the Commission left in place the ALJ’s mistaken conclusion that the five remaining, live claims in this matter are not anticipated or obvious because the prior art allegedly does not enable blood oxygen measurements on the wrist (as opposed to elsewhere on the body)—even though neither patent at issue requires or teaches such measurements on the wrist. . . . But the evidence established that Apple’s prior art reference (Lumidigm) discloses that its sensor can be incorporated into any “portable electronic device,” including wearable devices.

    The USITC is a branch of the US government designed to protect US industry against unfair foreign competition, including importation of  infringing products in a way that may harm a domestic industry.  See Section 337 of the Tariff Act of 1930.  An oddity of this case is that the patentee (Masimo) and the infringer (Apple) are both US companies. But, Apple still imports its products from Asia into the US and so is subject to agency action.

    Emergency motion at 5.  The emergency motion rhetorically cites what it calls the “Epstein/Paulsen rule.” See In re Epstein, 32 F.3d 1559 (Fed. Cir.1994); In re Paulsen, 30 F.3d 1475 (Fed. Cir. 1994).  By referring to the legal principles derived from these cases as a particular named rule, Apple is wanting us to recognize that the rule is well-established, binding, and that the result is inevitable.  As far as I know, no one has previously referred to the cases in this way.

    Additionally, Apple asserts Masimo should have been barred under the doctrine of laches given it kept its application family alive for more than a decade and then filed the application that led to the infringed patent just a week after Apple launched its Apple Watch products.  “Masimo has failed to provide any explanation for this convenient timing, which prejudiced Apple by causing it to expend tremendous time and money in developing versions of Apple Watch that Apple might otherwise have altered to avoid any alleged conflict with the asserted claims.”  Emergency Motion.  This argument is parallel to the ruling in Sonos v. Google.

    Apple has moved for both an immediate interim stay of the ITC’s orders, as well as a broader stay pending appeal. Apple contends that without a stay it will suffer irreparable harm from being unable to sell its newest Apple Watch models. It also notes there is a parallel Customs proceeding evaluating whether a redesigned version of Apple’s Watch falls outside the scope of the ITC’s orders, with a decision expected January 12th. Thus, Apple argues that even just a temporary stay until that date would allow it to largely continue business as usual.  Note, the particular redesign is current being kept secret by Apple – I expect that it is a software redesign that maintains some oxygen measurement functionality — even if less accurate.

    In a December 26th letter, the ITC opposed Apple’s request for both an interim stay and a broader stay pending appeal. The ITC argued that “Apple’s motion for an interim stay fails to establish a likelihood of success on the merits given that Apple raises no genuine legal issues but essentially requests that the Court reweigh the evidence with respect to the Commission’s factual findings on invalidity and domestic industry.” Further, the ITC claimed Apple would not suffer irreparable harm from import restrictions on Apple Watch models with pulse oximetry features. The ITC distinguished the facts here from Allergan Ltd. v. ITC, where restrictions implicated the movant’s entire business.

    One question I had about the case is whether, assuming Apple wins on appeal, Masimo will need to repay Apple  for the harm caused by the injunction. I heard from Michael Renaud, top IP attorney at Mintz, who told me that costs are possible, but “not commonly granted unless there is a demonstrable record of misconduct.”  Renaud is a licensing guy and suggests that Apple built its own woodshed by “deciding to go for the win instead reaching a commercially reasonable resolution.”

    Source: patentlyo.com - Dennis Crouch