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APPLE: Consolidation in short term?

A U.S. federal trade agency on Thursday found that Apple violated the patent of a rival tech company, a ruling that could lead to an import ban for certain models of the company’s smartwatch. The case revolves around medical-technology company Masimo, which alleged in a 2021 complaint to the U.S. International Trade Commission that Apple violated its patents related to measuring blood-oxygen levels. Apple has included a sensor, called a pulse oximeter, in most new models of the Apple Watch since 2020. The commission found that Apple was in violation of U.S. trade law and issued a limited exclusion order on certain Apple Watches, banning their import into the U.S. The Biden administration has 60 days to overrule the trade commission’s decision.

There are several possible ways Apple could avoid a ban. The company also has the option to make changes to the Apple Watch — potentially in the software — that could avoid using the contested technology.

Apple could also seek to settle with Masimo. The two have been engaged in an ugly legal battle for the past few years, where Masimo has alleged that Apple stole its technology and poached its employees in order to launch a competing feature in the Apple Watch. Apple said it would appeal the trade agency’s decision, which it said wouldn’t have an immediate impact on watch sales.

“Masimo has wrongly attempted to use the ITC to keep a potentially lifesaving product from millions of U.S. consumers while making way for their own watch that copies Apple,” an Apple spokeswoman said in a statement.

“Even the world’s largest company is not above the law,” Masimo Chief Executive Joe Kiani said in a statement. “This important determination is a strong validation of our efforts to hold Apple accountable for unlawfully misappropriating our patented technology.”

The relationship between Masimo and Apple began in 2013 when the two began exploring a partnership. Apple discussed potentially integrating Masimo’s technology into Apple products. The conversations between the two companies never ended up progressing.

At a later trial, it was revealed that Apple executives internally pitched the idea of buying Masimo and making Kiani vice president of medical technologies at Apple, according to court documents. But Apple decided against it because “acquisitions of this size aren’t our style,” an email reads. Masimo at the time of the talks was valued at more than $1 billion. Instead, Apple began hiring Masimo engineers and working on building the technology itself.

An Apple spokeswoman said that Masimo was one of many medical-technology companies it met with at that time. Apple opted to not work with Masimo because it viewed the company as more focused on clinical and medical applications rather than on consumers, the spokeswoman said.

A number of companies have complained about similar conduct by Apple over the years, The Wall Street Journal previously reported. The companies accused Apple of holding early partnership discussions with smaller companies and learning more about their technology. The companies said the conversations often don’t advance toward any type of partnership or acquisition — and they later see Apple launch a product or feature similar to theirs.

Apple has denied previous allegations that it copied smaller companies’ technology. When faced with claims of patent infringement, the company has said many of those patents are overly broad.

A company named AliveCor, which previously made Apple accessories that performed electrocardiograms, also alleged that Apple had violated its patents in launching similar health-sensing technology in the Apple Watch, starting in 2018. AliveCor said that in that year, Apple cut off access from its products, which previously integrated with the Apple Watch. The company sued Apple and complained to the trade commission, which ruled against Apple last year. That ruling didn’t ultimately lead to negative repercussions for Apple. Apple was able to get AliveCor’s patents connected to the complaint invalidated through an appeal system at the U.S. Patent and Trademark Office. As a result of AliveCor losing the patents, the trade commission’s exclusion order on certain Apple Watches didn’t go through. AliveCor is currently appealing the patent office’s decision to revoke its patents.

From a technical point of view, a bearish consolidation is still possible in the short term, but the area around 162 has an interesting cluster, which could trigger a bullish move.

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