Apple stops selling its latest smartwatches after losing a patent case against a competitor, saying “Even the most powerful company in the world must follow the law” – Fortune

Apple will stop selling the latest versions of its smartwatch in the US due to a patent dispute and pull some of its best-selling devices from the market during the busy holiday season.

Sales of the Apple Watch Series 9 and Ultra 2 will stop on December 21 at the company’s online store and at physical retail locations starting on Christmas Eve, it said in a statement on Monday.

The company is preparing for an impending ban on Apple Watch models with a blood oxygen sensor – a feature first added to the lineup in 2020 – and Masimo Corp. according to his own statements he invented it.

The International Trade Commission ruled in October that Apple infringed Masimo patents and must stop selling infringing devices. The patents relate to how the watches calculate a person’s blood oxygen saturation.

A presidential review of this order is currently underway. “While the review period does not end until December 25, Apple is taking preemptive steps to comply with the ruling if the ruling stands,” the company said.

Health features have become increasingly important selling points for the Apple Watch, putting the company in competition with medical device makers. Masimo, based in Irvine, California, sells a range of health monitoring technologies.

In a statement, Masimo said the ban “shows that even the most powerful company in the world must abide by the law.”

“The ITC determined that Apple stole Masimo’s patented pulse oximetry technology that measures blood oxygen,” the company said. “The ITC has conducted a thorough legal process and its expert judgment on this matter should be respected to protect intellectual property rights and maintain public trust in the United States patent system.”

The Series 9 and Ultra 2 models generate the majority of Apple’s watch sales. The company doesn’t disclose how much revenue the product line brings in, but it is a core part of its Wearables, Home and Accessories division, which generates more than $40 billion a year.

Analysts estimate that the Apple Watch alone generated around $17 billion in the 2023 fiscal year, which ended in September.

The sales halt will also impact some older Apple Watch models, including the Series 8, which Apple continues to sell in refurbished condition on its website. The blood oxygen feature was first added in the Apple Watch Series 6.

The news, previously reported by 9to5Mac, sent Apple shares falling as much as 1.6% in New York on Monday. The stock hit a record high last week. Masimo even rose by 5.7%.

The devices will be removed from Apple’s online store on Thursday at 3 p.m. New York time. Apple said there would be no impact on watches already sold to customers. The SE model, which lacks the blood oxygen function, also remains on offer.

The company said it would provide further information on December 25 after the close of the reporting period.

A Biden administration official said the review had been delegated to U.S. Trade Representative Katherine Tai. She was carefully considering all factors in the dispute, the official said. The deadline is Christmas Day as these reviews take 60 days and the order was placed on October 26th.

An Apple spokesperson said the ITC’s decision was wrong and should be overturned. The company plans to appeal the decision.

Although unrelated to the news, two executives overseeing Apple Watch development are leaving the company. Steve Hotelling, a key witness in the Masimo lawsuit, is retiring, while Apple Watch product design chief Tang Tan plans to step down in February.

Apple being forced to stop selling a core product in the U.S. is unprecedented, especially in the company’s most important quarter. In the past, Apple had to stop selling older iPhones in Germany, for example, due to patent problems.

In the US, the ITC has already ruled on other Apple disputes, including one with Samsung Electronics Co. over the iPhone and iPad. In this case, President Barack Obama intervened to overturn a ban. One notable difference with Masimo is that it is an American company.

Because the issue is related to hardware patents, Apple likely won’t be able to quickly resolve the dispute with a software update – a tactic the company has used in the past. If Apple doesn’t win on appeal or through presidential intervention, it’s unclear how long it would take the company to redesign the devices so that they don’t infringe Masimo’s patents.

The watches will continue to be sold through many third-party retailers, which could help boost Apple’s first-quarter sales. In some cases, Apple products generate a higher sales volume with external retailers than through their own channels.

The Cupertino, California-based company operates around 270 stores in the United States. Apple had previously stated that first quarter sales would be on par with the same period last year. That suggests the Apple Watch glitch could be the difference between seeing sales rise for the first time in a year or falling again. The company’s sales have already fallen for four quarters in a row, the longest such trend in two decades.

Apple has been preparing its retail stores for the disruption in recent days, sending stores new signs promoting its watches without showing specific photos of the Series 9 and Ultra 2.