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Apple Faces Lawsuit for Alleged Violation of Masimo Patents

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Apple AAPL is facing a lawsuit for health monitoring features of Apple Watch, per a recent Bloomberg report.

Masimo and its subsidiary Cercacor have accused Apple of unduly exploiting their trademark technology in Apple Watch products, mainly to overcome performance issues.

Lodged with the U.S. District Court for the Central District of California, the suit alleges that Apple Watch, including the latest Apple Watch Series 4 and Series 5 models, leveraged technology covered by 10 Masimo patents. Apple has been accused of multiple infringements in these 10 different patents.

Notable among these is intellectual property detailing Apple Watch’s blood oxygen monitoring system and heart rate detection through light emitters. Masimo wishes to prevent any further usage of its patented inventions.

Apple has also been accused of hiring employees of Masimo for its own advantage, including former executive vice president of Medical Affairs Michael O’Reilly and Cercacor CTO, Marcelo Malini Lamego. Notably, Michael O’Reilly is currently the vice president of Apple’s health technology department.

Apple Inc. Price and Consensus

Apple Inc. Price and Consensus

Apple Inc. price-consensus-chart | Apple Inc. Quote

Apple’s Increasing Legal Woes

The news comes at a time when Apple’s smartwatches are witnessing increased adoption in the market. Notably, per Strategy Analytics data, 6.8 million smartwatches were shipped by the company in third-quarter 2019, up 51% from the year-ago quarter figure of 4.5 million units.

Apple has been increasingly facing antitrust investigations and lawsuits over patents, user privacy and App Store-related lawsuits among others.

Last month, the tech giant was sued by a New York University cardiologist over Apple Watch’s use of his patented heartbeat monitoring invention, per a Bloomberg report.

Apple also faced a class action lawsuit in 2019, claiming that the company’s Siri voice assistant violated customer privacy by recording users without their consent, per a Business Insider report.

Moreover, Apple had faced legal issues with Qualcomm (QCOM - Free Report) . However, the iPhone-maker settled with Qualcomm by making an undisclosed payment and inked a six-year global patent license agreement and a chipset supply agreement in April 2019.

Further, Apple has been accused of unfair practices and stifling competition in the music streaming space. In March 2019, a complaint was filed by music streaming giant Spotify SPOT with the European Commission's antitrust regulators.

Wrapping Up

We believe that the removal of certain important features from Apple’s Watch may be a huge blow to the company. Thus, it is crucial for Apple to reach a settlement with Masimo, in case the lawsuit turns out to be legitimate.

Although Apple currently dominates the smartwatch segment, the loss of key features like blood oxygen monitoring system and heart rate detection through the light emitters could hurt its competitive position against the likes of  Fitbit FIT , Garmin and Samsung in the long run.

Zacks Rank

Apple currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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