Apple (AAPL) Scores Early Legal Victory as Redesigned Watch Clears Patent Claims

A U.S. trade judge has handed Apple an important preliminary win in its protracted patent battle with medical device maker Masimo, finding that the iPhone maker’s redesigned Apple Watch does not infringe two key pulse oximetry patents—a determination that could restore full functionality to one of Apple’s most profitable product lines if upheld by the full commission.

Apple Shares Fall

Apple shares edged higher following the announcement, though the stock had already priced in some optimism around potential design workarounds. Masimo, meanwhile, saw its shares decline 8.31% as markets reassessed the company’s leverage in ongoing settlement negotiations. The divergent price action reflects investor recognition that while legal disputes between the two companies will continue, Apple appears to have successfully engineered around the most disruptive element of the original import ban.

The ruling comes at a critical time for Apple’s wearables segment, which generated approximately $41.7 billion in revenue during fiscal 2024 and represents the company’s fastest-growing hardware category after services. Any extended disruption to Apple Watch sales—particularly the premium Series and Ultra models that command higher margins—would have meaningful implications for Apple’s overall financial performance.

Core Details of the Ruling

Administrative Law Judge Monica Bhattacharyya issued an enforcement initial determination Wednesday at the U.S. International Trade Commission, concluding that Apple’s “Redesign 2” Watch does not directly infringe asserted claims of U.S. Patent Nos. 10,912,502 and 10,945,648. Crucially, the judge also found that the redesigned device does not induce infringement when paired with an iPhone in the United States—addressing Masimo’s argument that the system as a whole still practices its patented technology.

The determination represents the latest chapter in a dispute that began in 2020 when Masimo accused Apple of poaching its employees and stealing trade secrets related to blood oxygen monitoring technology. In October 2023, the ITC issued an exclusion order banning imports of Apple Watch models with the contested pulse oximetry feature, forcing Apple to temporarily halt U.S. sales of its Series 9 and Ultra 2 watches during the crucial holiday shopping season.

Apple’s initial response—dubbed “Redesign 1″—simply disabled the blood oxygen feature through a software update, allowing the company to resume imports while preserving other health monitoring capabilities. The more sophisticated Redesign 2, introduced in August 2025, takes a different approach: the watch’s optical sensors still capture raw photoplethysmography data, but the critical SpO₂ calculations are now performed on the paired iPhone, with results displayed in the Health app rather than on the watch itself.

This architectural shift proved key to Judge Bhattacharyya’s analysis. By moving the patented processing algorithms off the watch hardware and onto a separate device, Apple appears to have successfully navigated around the literal scope of Masimo’s patent claims. U.S. Customs and Border Protection had previously cleared this design as compliant with the ITC’s exclusion order, and the ALJ’s determination provides additional legal validation of that assessment.

Broader Legal Context for Apple

The ITC ruling addresses only one front in a multi-venue legal war between the two companies. In a separate federal district court case in California, a jury awarded Masimo approximately $634 million in damages in February 2025, finding that Apple had willfully infringed Masimo’s patents and misappropriated trade secrets. Apple has appealed that verdict, arguing that the damages calculation was flawed and that it had independently developed its pulse oximetry technology.

Masimo has also challenged Apple’s redesigns through multiple channels, including filing enforcement actions with both U.S. Customs and the ITC arguing that the workarounds still constitute infringement. The company contends that Apple’s approach—particularly the iPhone-processing architecture—is merely a cosmetic change that continues to practice Masimo’s core inventions in substance if not in form.

The ALJ’s determination is preliminary and subject to review by the full six-member ITC Commission, which can adopt, modify, or reverse the judge’s findings. The Commission typically takes several months to issue final determinations in enforcement proceedings, meaning Apple faces continued uncertainty even as it ships redesigned watches. If the Commission reverses the ALJ and finds infringement, Apple could face renewed import restrictions and potentially be forced to implement yet another redesign or negotiate a licensing agreement with Masimo.

Implications for Apple’s Health Ambitions

Beyond the immediate financial impact, the dispute carries significant strategic weight for Apple’s long-term product roadmap. Health monitoring has emerged as a central pillar of the Apple Watch value proposition and a key driver of ecosystem lock-in, with features like fall detection, irregular heart rhythm notifications, and blood oxygen tracking differentiating the device from lower-priced fitness bands.

Apple has invested heavily in health research and regulatory pathways, earning FDA clearance for its ECG and atrial fibrillation detection features and conducting large-scale studies on heart health and hearing. The company has signaled ambitions to expand into additional health monitoring capabilities, including non-invasive glucose monitoring and blood pressure tracking—areas where established medical device makers hold substantial patent portfolios.

The Masimo dispute has demonstrated both the opportunities and risks inherent in this strategy. On one hand, Apple’s scale and engineering resources have enabled it to rapidly redesign products and find technical workarounds to patent obstacles. On the other, the company now faces heightened scrutiny from competitors and patent holders who view its health initiatives as encroaching on their traditional domains and intellectual property.

The iPhone-processing architecture validated by the ALJ could provide a template for future Apple health features, allowing the company to leverage its control of both the watch and phone platforms to distribute functionality in ways that may avoid patent claims tied to specific device configurations. However, this approach also introduces potential user experience compromises—the Redesign 2 blood oxygen feature requires users to have their iPhone nearby and open the Health app, rather than accessing readings directly from their wrist.

Apple Industry Context

For Masimo, the ALJ’s preliminary finding represents a significant setback in its efforts to leverage its ITC victory into either substantial ongoing royalties or a strategic settlement. Medical device companies have increasingly turned to trade exclusion orders as a powerful tool to combat what they perceive as tech giants appropriating healthcare innovations without proper licensing, and Masimo’s initial ITC win was seen as a potential template for similar actions.

The determination that Apple’s redesign falls outside the exclusion order’s scope may limit the effectiveness of this strategy going forward, as it demonstrates that companies with sufficient engineering resources can often design around specific patent claims—particularly when they control multiple elements of the user experience ecosystem. This could influence how other medical device makers approach patent disputes with large technology companies and affect their willingness to pursue ITC remedies versus district court damages.

The broader wearables market has watched the Apple-Masimo dispute closely, as it may shape the competitive landscape for health-focused devices. If Apple can continue offering advanced health monitoring features without licensing Masimo’s technology, it maintains a significant advantage over rivals like Samsung, Garmin, and Fitbit that may face similar patent challenges or need to negotiate licenses. Conversely, if the full ITC Commission reverses the ALJ and finds infringement, it could level the playing field and potentially open licensing opportunities for other device makers.

What Comes Next for Apple

Markets now await the full Commission’s review of the enforcement determination, which will likely take several months. Apple will continue shipping Redesign 2 watches in the interim, banking on the ALJ’s analysis being upheld. The company must also press forward with its appeal of the $634 million damages verdict, where it faces arguments over willfulness findings that could lead to enhanced damages or ongoing royalties.

Settlement remains a possibility, though the ALJ’s favorable determination may reduce Apple’s incentive to negotiate a comprehensive deal. A settlement would provide certainty and eliminate the risk of future infringement claims on current and planned features, but it would also validate Masimo’s patents and potentially require ongoing royalty payments that Apple has thus far avoided.

For Masimo, the path forward involves defending the ALJ’s determination at the Commission level while pursuing its district court damages and exploring whether other Apple health features might implicate additional patents in its portfolio. The company’s patents do not expire until 2028, providing several more years of potential leverage even if the current ITC enforcement action ultimately fails.

The dispute highlights the increasingly complex intellectual property landscape surrounding digital health technologies, where traditional medical device expertise intersects with consumer electronics innovation. As Apple and other tech giants push deeper into healthcare, similar patent conflicts seem inevitable—making the resolution of the Masimo case a potential bellwether for how courts and regulators will balance innovation incentives against intellectual property protection in this rapidly evolving sector.

Analyst Summary: Bull and Bear Cases

While the ALJ’s preliminary ruling clearly favors Apple, the company’s redesign strategy carries longer-term questions about user experience trade-offs and whether courts will continue accepting architectural workarounds as genuine non-infringement or eventually view them as evasive formalism. For now, Apple has bought itself breathing room to continue shipping its most advanced watches with health features largely intact, but the final word remains unwritten.