A MARTÍNEZ, HOST:
Apple has lost a patent dispute, and tomorrow it plans to stop the online purchases of two of its newest smartphone watches. The medical device company Masimo, which also makes fitness tracker, says Apple illegally copied the technology behind its blood oxygen sensor. Apple, though, disputes that, but the U.S. International Trade Commission ruled against the company. All right. We're going to ask Philip Elmer-DeWitt what it all means for customers. He has been covering Apple for decades. Philip, it's been a long-running legal battle between the two - first Federal Court and then the International Trade Commission. How did Masimo make its case?
PHILIP ELMER-DEWITT: Well, they tell a pretty - an embarrassing story about Apple, that Apple reached out to them, signed their nondisclosure agreement, saw their technology and then promptly hired 25 of their people, including their top executives, and patented something that looks very much - was different enough from Masimo's patent to get past the patent office.
MARTÍNEZ: So then why is Apple pulling its product off the shelves, considering that the formal review period for the ITC ruling is over - or not even over yet, actually?
ELMER-DEWITT: The ITC gave them 90 days to do something about the problem, and that expires on Christmas Eve. President Biden has until Christmas Eve to intercede. What Apple has done is pull the products off the shelves and off their store just before that expires, and what they've actually done is created a artificial shortage, so that if you wanted to buy one of these for Christmas, you better get out there and buy it before midnight tomorrow online or Christmas Eve, if you don't - if you want to get it. So what they've done is taken a patent ruling against them and turned it into a marketing opportunity.
MARTÍNEZ: Right. It's becoming more desirable. I think people are probably, you know, crushing all the stores to try and get at this watch if they really want it. You know, I'm wondering, Philip, when it comes to something like this, like the blood oxygen sensor, I mean, how does Apple determine what kind of features and things go into, say, a smartwatch? Is it because people clamor for it, or is it because they feel that, OK, this is what the new product needs?
ELMER-DEWITT: I don't think people were clamoring for this, although it's a useful feature because, you know, if your blood oxygen falls too low, your lips turn blue, and you fall over. It's how the oxygen gets from the lungs to the heart to the rest of the body. But what they're trying to - they're selling the Apple Watch as a health device. And this is just another feature that makes it stickier. If you like the watch, you'll probably buy other Apple products.
MARTÍNEZ: And when it comes to Masimo, their product, is it better than - in terms of what it purports to do than what Apple has for their product?
ELMER-DEWITT: They claim that it is better, and it sounds like it is because what - theirs is a continuous blood oxygen measure. So if you - if your oxygen falls low, it'll alert you, whereas Apple, you'd have to actually go out and ask the watch how your - how's your oxygen doing? The other hand, Masimo doesn't have a smartwatch on the market yet that includes this. They have a tracking device that does, but they're hoping to market a watch with this next year. But they don't have a distribution network. Apple really owns...
MARTÍNEZ: OK.
ELMER-DEWITT: ...The smartwatch market right now.
MARTÍNEZ: That's longtime Apple watcher Philip Elmer-DeWitt. He blogs at Apple 3.0. Philip, thanks.
ELMER-DEWITT: Thank you very much.
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