Federal Circuit Appellate court Grants Emergency Stay of Apple Watch Ban

by Dennis Crouch

The patent battle between Masimo and Apple over pulse oximetry technology in the Apple Watch took a new turn on December 27th. Despite the recent import ban imposed by the U.S. International Trade Commission (ITC), Apple was granted a temporary stay by the U.S. Court of Appeals for the Federal Circuit. For now, this emergency ruling blocks the government from enforcing the exclusion order on certain Apple Watch models through at least mid-January. However, the legal fight is far from over. For Masimo, this short-term win for Apple weakens its bargaining position as the two companies continue their protracted patent dispute in courts and before regulatory agencies.

Although President Biden refused to act, the Federal Circuit has granted Apple a temporary reprieve of the ITC exclusion order barring its Apple Watch for importation.  The dispute focuses on patents held by light-based pulse-oximetry innovator Masimo, and the ITC’s conclusion.

Order: Fed Cir Apple Order Granting Temp Stay

On December 27, the Federal Circuit granted Apple’s request for an emergency stay of the import/sales ban.  This temporary stay prevents Homeland Security’s Customs and Border Protection (CBP) division from enforcing the exclusion order while the court considers Apple’s broader motion to stay the ban pending its full appeal.  This is effectively a temporary restraining order that the court issued without considering input from the patent holder — it will likely last until late January. At that point, the court will consider whether to extend the stay until conclusion of the appeal — a process that typically takes about 18 months.

The order comes just one day after Apple filed emergency motions asking the court to put the brakes on the ITC’s ruling. As a condition of the stay, Apple must continue to “comply with the same bond requirements set forth by the Commission in the Remedial Orders governing the Presidential Review Period.”  This portion of the order is meaningless because the bond set by the ITC was $0 (i.e., no bond).   This is unusual — a bond is typically set that the adjudged infringer loses if it loses the appeal.  The result then is that Apple can continue to import adjudged-infringing watches without direct penalty on the ITC side.  Still, this portion of the case is focused only on barring imports via ITC action — Masimo is able to separately seek money damages for the infringement in district court.

The court also granted the ITC’s request for more time to respond to Apple’s motion for a stay pending appeal. The ITC has until January 10 to file its opposition, with Apple’s reply due January 15. The Federal Circuit will then decide whether to continue blocking enforcement of the exclusion order through the end of Apple’s appeal.

Meanwhile, Apple has proposed a slight modification to its watch to CBP and is seeking a judgment that its modified version falls outside of the ITC exclusion order. That initial decision will likely be made around January 15.  This emergency stay thus provides breathing room for Apple and also greatly weakens Masimo’s bargaining position.  At this point though, Apple has not released the details of its work-around and so we don’t know (1) whether it infringers and (2) whether it actually works to measure blood oxygen and pulse.

The order was issued PER CURIAM by the Court Clerk Jarrett Perlow.  This suggests that it was referred to an unnamed judicial panel who instructed the Clerk.  It is unclear at this time whether the same panel will continue with the case.

The order does not provide any reasoning or justification for the stay or the likely merits issue.  My belief is that the  merits arguments raised by Apple created enough of a gut check for the court to grant the stay, but that the court has not seriously considered the merits. Although courts have broad authority to issue temporary stays, the second round of stay pending pendante lite has more legal bounds and in particular requires an in depth analysis of whether Apple is likely to win its appeal.  This is similar to a preliminary injunction motion, albeit at the appellate level. And, unlike at the district court, this is a situation where the patentee has already won on the merits — this shifts all of the burdens to the infringer to show that the stay is justified.

Some of the arguments in the briefing this far focus on the harm to each side. Apple argues that this is one of its flagship products and thus will suffer major irreparable market and goodwill harm because of the exclusion order – that it believes will eventually be overturned.  Apple notes the $0 bond set by the ITC as suggestive that Masimo will not suffer harm. According to Apple, Masimo has never identified any monetary harm it would suffer from a stay. On the other hand, Masimo argues that Apple has already already voluntarily ceased sales and shipments of the contested watches on December 21st (online orders) and December 24th (retail), prior to the ITC order’s effective date. Thus, the status-quo is no-imports.  Apple responded that its  orderly compliance with the exclusion order should not be seen as negating irreparable harm.

Bottom line: For now Apple avoids disruption and can continue importing and selling the contested Apple Watch models through at least mid-January.  There will be more to come at that time.

Emergency Appeal of the Apple Watch Ban

Mark Selwyn is lead counsel on appeal for Apple along with his WilmerHale team.  Ronald Traud and Houda Morad are the ITC attorneys handling the appeal thus far. Joseph Re is lead counsel for Masimo along with Stephen Jensen, Sheila Swaroop and Jonathan Bachand from Knobbe.