An incoming call on Apple Watch Series 9.
Apple
US regulators ruled that new Apple Watches infringe upon existing patents held by Masimo.In response to the ruling, Apple said it would stop selling two models of the Apple Watch this week.The halt in sales could cost the company between $300-400 million, a Wedbush analyst estimated.
If Apple moves ahead with its tentative plan to stop selling two of the latest models of Apple Watches this week, it could cost the company hundreds of millions of dollars.
On Monday, Apple announced plans to stop selling the Series 9 and Ultra 2 versions of its smartwatch for US customers online beginning Thursday afternoon, and in its stores on Sunday.
The disruption will likely cost Apple about $300-400 million in holiday-season sales, Wedbush Securities analyst Dan Ives estimated. That’s a relative drop in the bucket for Apple, given that analysts are expecting Apple to generate nearly $120 billion in sales during the October-December period, including the holiday shopping season.
The sales suspension on the two Apple Watch models “doesn’t move the needle much for the company, but still, it couldn’t have come at a worse possible time,” Ives said.
Apple’s stock so far hasn’t been significantly affected by the announced sales suspension on the two watch models, leaving the shares near their record high reached last week.
“Apple strongly disagrees with the order and is pursuing a range of legal and technical options to ensure that Apple Watch is available to customers,” a representative for Apple said in a statement to Business Insider. “Should the order stand, Apple will continue to take all measures to return Apple Watch Series 9 and Apple Watch Ultra 2 to customers in the US as soon as possible.”
Apple’s patent dispute has reached the White House
Apple’s move to halt sales of its new smartwatch models stems from an October decision by the International Trade Commission restricting Apple’s watches with the Blood Oxygen measurement feature as part of an intellectual property dispute with the medical technology company Masimo.
The White House had 60 days to review the ITC order issued on October 26, meaning Apple could have kept selling the two affected models in the US through Christmas. But the Cupertino, California, company said in a Monday statement that it is pausing sales early to ensure it complies with the ITC order, in an apparent indication that the company isn’t confident that the White House will intervene in the international patent dispute.
Business Insider previously reported that it’s unlikely the Biden administration will overturn the ruling, but is possible and has happened before. Former President Barack Obama in 2013 vetoed an ITC ban on some models of the iPhone and iPad following a similar patent dispute between Apple and Samsung.
White House press secretary Karine Jean-Pierre said the Biden administration was tracking the Apple Watch trade case. She said US Trade Representative Katherine Tai has the authority to decide on the matter and that she was “carefully considering all of the factors in this case.” Jean-Pierre said she didn’t want to get ahead of any decision Tai might make.
More patent disputes may be on the horizon
If the ITC’s sales ban isn’t overturned, Apple pledged to “take all measures” to resume sales of the Series 9 and Ultra 2 models in the US as soon as possible.
Bloomberg reported the company’s engineers are scrambling to make last-minute software changes to the watches in an attempt to work around the ITC’s ruling, though there’s no guarantee their efforts will prevent the ban from taking place.
The Apple Watch SE, which lacks the Blood Oxygen feature, will remain on sale in the US after Christmas Eve. Previously purchased Apple Watches equipped with the Blood Oxygen feature aren’t affected by the ITC order.
This isn’t the first patent roadblock the Apple Watch has run into as it increasingly morphs into a health-management device. Last year, the ITC ruled that Apple had infringed on the wearable EKG technology of AliveCor — a decision the Biden administration declined to overturn. That dispute hasn’t directly affected Apple Watch sales yet because another regulatory body had ruled that AliveCor’s technology isn’t patentable. The legal tussle on that issue is still ongoing.
The patent headaches facing Apple as it tries to infuse more medical technology into its watch models make it increasingly likely the company will either have to start working out licensing deals or simply acquire startups specializing in the field, Ives predicted.