The Journal. - The Company Taking on Apple’s Watch Technology

Episode Date: January 24, 2024

If you own an Apple Watch, you may have noticed the device’s pulse oximeter feature. Masimo, a medical technology company, claims that the oximeter technology is theirs and it is suing Apple. Masimo CEO Joe Kiani and WSJ’s Aaron Tilley on the story of how Masimo decided to take on a tech giant.  Further Listening: -One Company’s Quest to Burst Apple’s Blue Bubble Texts  Further Reading: -The Entrepreneur Who Bet His Company on a Fight With Apple  -Apple to Remove Blood-Oxygen Sensor From Watch to Avoid U.S. Ban  Learn more about your ad choices. Visit megaphone.fm/adchoices

Just to start off, could you introduce yourself? My name is Joe Chiani. I'm founder, chairman, and CEO of Massimo. Massimo is a medical technology company. Think sensors, monitors, and wearable health devices, including something called a pulse oximeter. including something called a pulse oximeter. And I just want to know, are you wearing a device with a pulse oximeter right now? I am. I am always. Here it is. This is a Casio-looking watch.

Casio-looking. I love it. And so what's your blood oxygen level right now? All right. I'm actually really good. I'm at 98 blood oxygen. There you go. My pulse rate is 77. So I'm a bit excited.

I'm usually lower. And my hydration index, and I think we're the only company with this measurement, I am slightly dehydrated, minus 0.6. A pulse oximeter measures the amount of oxygen in your blood. Low oxygen levels can be an important early sign of health issues. During the pandemic, the technology gained more attention, including from one of the biggest players in tech, Apple. With Apple Watch Series 6, you can measure your blood oxygen right from your wrist. In September of 2020, Apple released a version of the Apple Watch with a pulse oximeter. Now, the Blood

Oxygen app on Series 6 lets you measure your blood oxygen for fitness and wellness purposes from your wrist anywhere and at any time. This is a great new tool for your overall well-being. anywhere and at any time. This is a great new tool for your overall well-being. To Joe at Massimo, Apple's new feature was a big problem. And then just for the record, Joe, from your point of view, what has Apple done that you find objectionable? They stole our people, they stole my patents,

and they stole our property. Apple has denied that it stole anything from Massimo and has accused the company of copying its technology. Now, the two companies are battling it out in court. And Apple has removed the pulse oximeter for its new watches, at least for now. Welcome to The Journal, our show about money, business, and power. I'm Jessica Mendoza. It's Wednesday, January 24th.

Coming up on the show, the Apple Watch, a patent dispute, and a tech giant on the defensive. On August 9th, don't miss the Borderlands movie starring this summer's biggest cast. Everybody buckle up. With Cate Blanchett, Kevin Hart, Jack Black, Ariana Greenblatt, and Jamie Lee Curtis. Wow, you never see that. Borderlands. While studying electrical engineering in college in the 1980s, Joe Chiani came across a problem. Most pulse oximeters that were used in hospitals weren't accurate if the patient was moving. Okay, so for a long time, oximeters were reading, were giving false readings because they were not able to distinguish between motion and not motion.

Correct. And the industry thought it's impossible to distinguish it. They didn't understand what the real phenomena was. Me explaining to you, it's the venous blood moving back and forth. They didn't understand that. They just thought it's noise over noise, and that's why it's measuring falsely low. Joe started thinking of ways to solve the problem. And in 1989, he developed a new kind of pulse oximeter and started Massimo.

It's a more accurate pulse oximeter. More accurate and reliable during motion. It is the first time ever pulse oximeters have been proven to actually improve outcomes. You sound very proud of the work that you've done. I am. You know, one of the cool things

about Massimo and things I'm really proud of, unlike many companies that if they weren't there, somebody else would have done what they've done. I really believe if we hadn't been here,

you would not have measure-through-motion pulse oximetry, which is now the standard in most hospitals. Massimo continued to grow. And in 2013, the company got the attention of one of the titans of tech. We got a call from Apple saying, hey, you guys are the platinum in non-invasive monitoring. We would like you to come to Apple and we want to learn everything about your technology because we want to integrate it. So I love that call. I had just finished reading Steve Jobs' autobiography and I was enamored with them, despite some people advising me against it.

Our colleague Aaron Tilley reports on Apple and has also seen documentation of this meeting. Apple reached out and emails that later came out in court. It showed Apple saying, come on in, you know, come on in. We want to learn all about you and your technology and discuss potentials to integrate. Let's talk about each other and all the great things we can do together. Joe left the meeting feeling really good. He thought that Apple may want to partner with or acquire Massimo. I was in Cupertino. We met at their office.

There were probably five to ten people from Apple in the meeting. I thought the meeting went really well. They told me the meeting went really well. They told me they wanted to come to Massimo. And they said, anything I need, tell them. They want to really integrate our technology. Then, a few months later, Joe heard from his chief technology officer. And my CTO there sent me an email, January 2014. Then, a few months later, Joe heard from his chief technology officer.

And my CTO there sent me an email, January 2014, saying, I've decided to go to Apple. And despite him telling me, when I go to Apple, if they have me work on anything competitive, I won't do it. I won't do it. It's not in my DNA. I will leave. I wasn't sure if I could believe him. I was hoping I could believe him, but that's when I didn't think we would ever partner anymore. How did you feel? Punch in the gut because he and I were friends.

We would, it wasn't just work. We would socialize together. Our families would get together. And he knew that I was afraid of Apple. It was the one company I was fearing that if they ever did take our technology, it would be a problem that would be difficult to solve. Massimo's chief medical officer and several engineers also went to Apple. Apple has denied any wrongdoing in hiring these employees. Some of those employees have said that Apple explicitly told them not to bring confidential Massimo information to Apple. The Apple Watch had not yet launched, but there were lots of rumors in the tech world that Apple,

under its new CEO, was interested in expanding into health technology. Why was this type of technology important to Apple, especially in 2013? Well, at the time in 2013, they were looking for new opportunities in the post sort of Steve Jobs era. Steve Jobs had passed away a few years earlier and Tim Cook was running things. So he was looking for his next big bet, kind of what is going to be the next thing that takes Apple to another level, and that proves the company can still innovate and create new markets. So the Apple Watch was the next product, and they were also trying to figure out what was the Apple Watch going to

be useful for. And health emerged quickly as a one big area that could be useful for the Apple Watch. In 2019, Apple filed some patents for new technology, pulse oximeter technology. And they had the name of a prior Massimo engineer on them. And these were detailing technology that was remarkably alike Massimo. And on top of that, Massimo alleges that these patents contain trade secrets. These were things that they hadn't patented themselves. They hadn't put this out there in the world. These were trade secrets.

And somehow they were appearing in these Apple patents. And so when did you decide to take on Apple legally? Well, I wanted to take on Apple legally sooner. But the way the law works, you can't assume people are going to take your intellectual property. You have to wait to see if they do. So the first time we had the proof that they had taken it was with the publication of those patents. And it was in the lab notebooks, verbatim to what they patented at Apple. So, yeah, that was the first time I went to my lawyers and said, what do we do? How fast can we do this?

And eventually they advised me to go forward. The lawsuit didn't stop Apple from releasing the first Apple Watch with a pulse oximeter feature in 2020. How does it feel to you going up against Apple in this way? It's daunting. I hear people calling it David versus Goliath. I really feel it. I feel like I'm dealing with the Goliath. Still, neither Massimo nor Apple were backing down. That's next. Travel better with Air Canada.

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Available at the LCBO. Must be legal drinking age. Please enjoy responsibly. Massimo isn't the only company that has complained about Apple. Our colleague Aaron says the tech giant has developed a bit of a reputation in Silicon Valley. So I spent some time looking into this topic. Based on my reporting, there does appear to be a pattern with Apple. They will meet with companies, learn about their technology, stop the privately, for venture capital investors to say, never talk to Apple. It is a pattern I think a lot of Silicon Valley recognizes and are starting to become wary of Apple. And how long has this been going on, based on your reporting?

I mean, this has been going on for a long time. So in the 90s, there's this term that emerged from, that is called Sherlocking, where Apple allegedly ripped off a Mac developer and released this product called Sherlock. And it became shorthand for kind of stealing smaller companies' developers' products. One app developer called Blix has alleged that Apple stole its technique for anonymizing email addresses. Another company, Tile Inc., makes small tracking devices. It has faced off against Apple after the launch of AirTags. Apple said that it doesn't steal technology, that it respects the intellectual property of other companies,

and that it would fight the claims in court. Massimo's fight against Apple has been twofold. One is through the courts, where it's suing Apple for patent infringement. That case ended last April with a hung jury and is awaiting a retrial. The other way is through the U.S. International Trade Commission, a government agency that makes sure businesses don't engage in unfair trade practices. Because Apple is a global company that manufactures in China, Massimo can ask that commission to intervene. And there, it's had more success. The regulators, specifically the United States International Trade Commission,

has determined that Apple has, in fact, violated Massimo's patents. Apple is appealing the ruling. But until then... Apple is removing its blood oxygen sensor from some of those Apple Watch models. Beginning today, Apple will once again sell its Series 9 and Ultra 2 watches online and at its retail stores, but the watches will be without the blood oxygen feature. Apple now says it will disable the blood oxygen monitoring feature on two of its watches. And so you got your injunction. Apple is taking the technology off its watches. Is that a win?

Is that enough? That is a big win in my book. As a patent holder, as someone who is innovating their own products, yeah, that's the most important thing. Now, we have spent $100 million on this litigation up to date. So, yeah, do I want to get damages for past infringement? Yeah, I'd like to get those. Is that paramount? Is that really what I'm like dying for?

No, it isn't, not personally. So what I'm really after is protecting our intellectual property. We're a company that's built on inventions and creation of products. And if I don't have to compete with my own technology in the hands of the biggest company in the world, that should be good for us.

Aaron also says this could be an important moment for Apple. I mean, it's a little hard to tell where all this is going to end up. If Massimo does ultimately succeed, I do see Apple's one scene is sort of unstoppable. I do see that as diminishing their that sense of their inevitability that they are always going to succeed and win. The narrative of tech is that the, you know, the new innovators will take over the older established players and out-innovate them. But for the past 10 years, it's really been a consolidation of tech's power where a few players have succeeded extraordinarily. We just haven't seen a lot of new entrants, really serious new entrants for a while now.

That's all for today, Wednesday, January 24th. The Journal is a co-production of Spotify and The Wall Street Journal. If you like our show, follow us wherever you get your podcasts. We're out every weekday afternoon. Thanks for listening. See you tomorrow.