The Proposal to Pause the Apple Watch Import Ban Should Not Succeed: A Focus on The Prospect of Irreparable Injury

Blog Post | 112 KY. L. J. ONLINE | January 23, 2024

The Proposal to Pause the Apple Watch Import Ban Should Not Succeed: A Focus on The Prospect of Irreparable Injury

By: Meghan Hashemi, Staff Editor, Vol. 112 

In October 2023, the U.S. International Trade Commission (ITC) ruled that certain models of the Apple Watch infringed on patents held by the Masimo.[1] Masimo Corp., a global medical technology company, alleged that “Apple infringed its patent for a blood oxygen sensor that can read someone’s pulse.”[2] As a result of their ruling, the commission implemented an import ban on the allegedly infringing watches on Dec. 26, but Apple fought back on this temporary ban.[3] Apple “won a temporary reprieve from a federal appeals court . . . , two months after the US International Trade Commission ruled the smartwatches infringed patents held by medical-device maker Masimo Corp.—and one day after the device’s US sales halted.”[4] This allowed the Apple Watch Series 9 and Ultra 2 to be sold in Apple’s stores temporarily.[5] Apple also “filed an emergency request to pause enforcement of the ITC’s ban until its motion for a full stay pending appeal is resolved.”[6]

The ITC responded to Apple’s request for a stay by pressing an appeals court to reject Apple’s arguments to block the ban on certain imports for the period of Apple’s appeal.[7] Apple’s “arguments amount to little more than an indisputably adjudicated infringer requesting permission to continue infringing the asserted patents,” the ITC said.[8] ITC claims that Apple fell flat on establishing “the two most important factors in granting a stay—likelihood of success on the merits and irreparable harm.”[9] A successful motion for stay must include a showing on four factors: “(1) the likelihood that the moving party will prevail on the merits; (2) the prospect of irreparable injury to the moving party if relief is withheld; (3) the possibility of substantial harm to other parties if relief is granted; and (4) the public interest.”[10]

 Agreeing with the Commission’s position, Apple has failed to adequately support the prospect of irreparable injury if stay was withheld.[11] Apple’s revenue source is diversified in which they make and sell a range of products including “smartphones, personal computers, tablets, wearables, and accessories.”[12] Apple’s iPhone sales consisted of 48.5% of Apple’s revenue in the fourth quarter of 2023, the largest allotment of revenue by product.[13] Apple also has its own cloud service, Apple Music streaming service, and Apple TV+  streaming service located in the service business sector.[14] Apple’s service business generates the highest total sales revenue retained after direct costs are incurred compared to its products business.[15] In FY 2022, “among its products, iPhones accounted for 52.1% of total revenue; Macs, 20.2%; iPads, 7.4%; and Wearables, Home and Accessories, 10.5%”.[16] Services revenue in FY 2022 consisted of 19.8% of total revenue.[17] These financials show that Apple is diversified in their business, generating income from multiple products and service offerings.

Apple would need to show more than pure speculation to claim that there would be irreparable injury in temporarily halting the sale of the Apple Watch Series 9 and Ultra 2. Notice the varied numbers, in which iPhones consisted of 48.5% of revenue for FY 2022, compared to “10.5% of overall revenue for the year” was generated by Apple’s Wearable, Home and Accessory products.[18] The vast difference in those values shows that the impact on Apple’s business from the Apple Watch is drastically lower than the iPhone. It is also worth mentioning that the 10.5% of overall revenue from the category that the watches contribute to includes Airpods, Apple TV, Homepod, and Beats; the overall revenue the Apple Watch generates is in fact less than 10.5%.[19] Irreparable harm from a temporary pause of a product that is less than 10% of a company’s overall revenue has not been shown by Apple.

Furthermore, Apple contends that irreparable harm will go to its “goodwill and . . . reputation . . .” if halted from importing the impacted Apple Watch models.[20] It is worth noting again that this order affects a segment of the many models of Apple watches and the Commission echoed my opinion that “Apple Watches overall are just one product line of Apple’s vast portfolio of product and service offerings.”[21] Without further information, such as an affidavit supporting reputational harm or financial models and data to quantify the harm, Apple’s argument itself cannot support a showing of irreparable harm.

[1] Bobby Allyn, Apple stops selling latest Apple Watch after losing patent case, NPR (Dec. 18, 2023, 7:10 PM), https://www.npr.org/2023/12/18/1220125508/apple-watch-series-9-ultra-2-masimo-patent.

[2] Id.

[3] Id.

[4] Christopher Yasiejko, Apple Eyes Ling-Term Software Fix for Watch While Appealing Ban, Bloomberg Law (Dec. 28, 2023), https://news.bloomberglaw.com/ip-law/apples-unusual-watch-fight-continues-after-pause-on-ban.

[5] Id.

[6] Id.

[7] Christopher Yasiejko, ‘Weak’ Bid to Pause Apple Watch Import Ban Should Fair, ITC Says, Bloomberg Law, (Jan. 10, 2024, 7:08 PM), https://news.bloomberglaw.com/ip-law/weak-bid-to-pause-apple-watch-import-ban-should-fail-itc-says.

[8] Id.

[9] Id.

[10] Mich. Coal. of Radioactive Material Users, Inc. v. Griepentrog, 945 F.2d 150, 153 (6th Cir.1991).

[11] Yasiejko, supra note 7.

[12] Matthew Johnston, How Apple Makes Money, Investopedia (June 8, 2023), https://www.investopedia.com/how-apple-makes-money-4798689.

[13] Federica Laricchia, Apple’s revenue share by operating segment 2012-2023, by quarter, Statistica (Nov. 3, 2023), https://www.statista.com/statistics/382260/segments-share-revenue-of-apple/#:~:text=Apple's%20iPhone%20sales%20accounted%20for,contribution%20to%20Apple's%20net%20sales.

[14] Johnston, supra note 12.

[15] Id.

[16] Id.

[17] Id.

[18] Id.

[19] Id.

[20] Motion for Appellant at 6, Apple Inc. v. ITC, No. 24-01285 (Fed. Cir. 2023), https://www.bloomberglaw.com/product/blaw/document/X3GNLC7KH2K8A18SD9UI5OPEVT6.

[21] Id. at 19-20.