Apple to bring back blood oxygen feature to some smartwatches amid lawsuit

Apple is reinstating the blood oxygen measurement feature on its Apple Watch Series 9, Series 10, and Ultra 2 models in the US via a software update, following US Customs approval. This development addresses a protracted patent dispute with Masimo, which had resulted in an ITC import ban and the feature's removal due to infringement claims. The move allows Apple to restore key functionality while navigating the legal landscape, impacting Masimo's stock, which fell 4.5% on the news.

Analysis

Apple has successfully navigated a significant legal and regulatory hurdle by securing U.S. Customs approval to re-enable its blood oxygen feature on Apple Watch Series 9, 10, and Ultra 2 models via a software update. This development partially circumvents the import ban previously enforced by the U.S. International Trade Commission (ITC) following a patent infringement ruling in favor of Masimo. For Apple, this represents a crucial operational recovery, restoring a key health-monitoring function that is a competitive differentiator in the wearables market. Conversely, this is a material setback for Masimo, whose legal victory at the ITC has been effectively weakened by Apple's software-based workaround. The market reaction underscores this divergence, with Masimo's shares declining 4.5% on the news, reflecting diminished investor confidence in the company's ability to leverage the patent dispute for a significant financial settlement or licensing agreement.

Key Decisions for Investors

• For Apple investors, this development de-risks a notable headwind for the wearables division, reaffirming the company's resilience to legal challenges and potentially bolstering the sales outlook for its latest watch models.
• Investors in Masimo should reassess the valuation impact of the Apple litigation, as this software workaround significantly reduces Masimo's leverage and makes a highly lucrative outcome from the dispute less probable.
• Given the protracted nature of the legal battle, both AAPL and MASI remain exposed to headline risk from future court rulings, and positions should be managed with an awareness of potential volatility.