MESSAGE
| DATE | 2023-04-21 |
| FROM | Ruben Safir
|
| SUBJECT | Subject: [Hangout - NYLXS] Apple Inc - the ultimate patent troll
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https://www.wsj.com/articles/apple-watch-patents-5b52cda0
It sounded like a dream partnership when Apple Inc. AAPL -0.58%decrease;
red down pointing triangle reached out to Joe Kiani, the founder of a
company that makes blood-oxygen measurement devices. He figured his
technology was a perfect fit for the Apple Watch.
Soon after meeting him, Apple began hiring employees from his company,
Masimo Corp., MASI -0.44%decrease; red down pointing triangle including
engineers and its chief medical officer. Apple offered to double their
salaries, Mr. Kiani said. In 2019, Apple published patents under the
name of a former Masimo engineer for sensors similar to Masimo’s,
documents show. The following year, Apple launched a watch that could
measure blood oxygen levels.
“When Apple takes an interest in a company, it’s the kiss of death,”
said Mr. Kiani. “First, you get all excited. Then you realize that the
long-term plan is to do it themselves and take it all.”
Mr. Kiani is one of more than two dozen executives, inventors, investors
and lawyers who described similar encounters with Apple. First, they
said, came discussions about potential partnerships or integration of
their technology into Apple products. Then, they said, talks stopped and
Apple launched its own similar features.
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Apple said that it doesn’t steal technology and that it respects the
intellectual property of other companies. It said Masimo and other
companies cited in this article are copying Apple, and that it would
fight the claims in court.
Apple has tried to invalidate hundreds of patents owned by companies
that have accused Apple of violating their patents. According to lawyers
and executives at some smaller companies, Apple sometimes files multiple
petitions on a single patent claim and attempts to invalidate patents
unrelated to the initial dispute.
Many large companies, particularly in tech, have been known to scoop up
employees and technology from smaller potential rivals. Software
developers have given a name to what they describe as Apple’s behavior
in such cases: sherlocking. The term refers to an episode about two
decades ago, when Apple released a software product called “Sherlock”
that helped users find files on its Mac computers and perform internet
searches.
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Joe Kiani, founder and CEO of biotechnology company Masimo, in Irvine,
Calif. He said that after meeting with him about his company’s
blood-oxygen measurement technology, Apple began hiring Masimo
employees. Apple later launched a watch that could measure blood oxygen
levels. Photo: Philip Cheung For The Wall Street Journal
After an outside company built a tool that had a few more capabilities,
which it called “Watson,” Apple released an updated version of Sherlock
with many of the same features. According to the engineer who built
Watson, which he subsequently sold, Apple co-founder Steve Jobs
personally called him to defend the move.
Companies that allege Apple copied them fight back in two ways:
complaining publicly to get attention from regulators interested in
Apple’s market power, or filing lawsuits against Apple.
App developer Blix Inc. has alleged that Apple stole its technique for
anonymizing email addresses during online service sign-ups when the
company launched its “Sign in with Apple” feature in 2019. Tile Inc.,
the maker of object-tracking devices that once integrated seamlessly
with the iPhone, has faced off against Apple after the company launched
a similar product called the AirTag in 2021.
Currently, the Justice Department is investigating whether Apple favors
its own products over those of third-party developers such as Tile,
according to people familiar with the matter.
Many of the patent battles focus on technology that smaller companies
said they developed and that Apple appropriated for its watch. Apple
said many of the patent violation claims it faces are based on rivals’
patents that are overly broad.
“The truth, is these companies are blatantly copying our products or
stifling competition by using invalid patents,” an Apple spokeswoman
said. “We will continue to fight these baseless claims in court and to
advance technologies on behalf of our customers and public health.”
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Since its founding, Apple has had a reputation for innovation, and it
spends enormous amounts of money developing its own technology. In its
2022 fiscal year ended in September, its research and development budget
was $26 billion, up nearly 20% from the prior year.
Under Chief Executive Tim Cook, Apple has tried to boost profit margins
and differentiate its products by designing more components of its
products in-house. It sometimes uses acquisitions to gain access to
technology, and typically avoids licensing agreements with smaller
operators, according to executives and patent lawyers who have attempted
to strike deals with Apple.
Apple said it pays licensing fees to many companies of different sizes.
The spokeswoman said it has licensed more than 25,000 patents from
smaller companies over the past three years.

A model of a pulse oximetry sensor in Masimo’s lab. Photo: Philip Cheung
For The Wall Street Journal
In 2016, a company called AliveCor Inc. announced a watchband accessory
for conducting electrocardiograms that could pair with the newly
released Apple Watch. Before the product launched, AliveCor founder
David Albert was invited to Apple’s Cupertino, Calif., headquarters,
where he met for 45 minutes with Apple Chief Operating Officer Jeff
Williams, the leader of Apple’s healthcare initiatives.
Mr. Albert said he placed a prototype of the device onto Mr. Williams’s
wrist and checked his heart rhythm. Mr. Albert recalled Mr. Williams
telling him: “We’d like to find a way to work with you, but we might
compete with you.” Mr. Williams didn’t respond to requests for comment.
In 2017, AliveCor became the first medical-device accessory for the
Apple Watch approved by the Food and Drug Administration.
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In 2018, Apple released its Series 4 watch, which could perform an
electrocardiogram without the AliveCor accessory. Around that time,
Apple changed its operating system in a way that AliveCor’s hardware and
software integration no longer worked with the watch. A year later,
AliveCor stopped selling the Apple Watch accessory.
The Apple spokeswoman said the company had been developing its own
electrocardiogram for the Apple Watch since 2012, three years before it
launched the watch.
In 2021, AliveCor filed a patent-infringement complaint before the
International Trade Commission, a federal agency that investigates
unfair trade practices, alleging that Apple violated three of its
patents. In December, the commission ruled in favor of AliveCor, barring
imports into the U.S. of all Apple Watches with the heart-sensing
capabilities.
Separately, Apple took the dispute to the Patent Trial and Appeal Board
system, which was set up to invalidate bad patents and help companies
defend themselves against so-called patent trolls, litigants who file
broad patents on numerous technologies without producing any real
products. That board invalidated the AliveCor patents under dispute,
thereby nullifying the import ban. AliveCor has appealed that ruling.
Apple also has sought to invalidate seven other AliveCor patents,
AliveCor said.
Apple said that when it files multiple patent board petitions against
companies, all stem from the original dispute.
AliveCor board chairman and investor Vinod Khosla, a venture capitalist,
said he now steers companies in which he has invested away from having
any talks with Apple. “Apple will talk to everybody and then try to
steal the best people who are developing the technology,” he said.
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Apple said that it doesn’t steal technology and that it respects the
intellectual property of other companies. Above, Apple employees at an
event last fall. Photo: Carlos Barria/Reuters
Since 2012, Apple has attempted to invalidate more patent claims before
the Patent Trial and Appeal Board than any other petitioner, according
to intellectual-property research firm Patexia.
Executives and lawyers involved in such cases said it can cost about a
half-million dollars to defend against each petition, a high cost for
small tech companies.
Apple said it is selective in how it uses the patent system, and that it
isn’t its intent to drown any company in legal filings. The Apple
spokeswoman said its use of the petition system is consistent with other
similarly situated companies.
Andrei Iancu, who stepped down as director of the U.S. Patent and
Trademark Office in 2021, said the patent system “is tilted in favor of
the largest established firms. This is not a coincidence. It’s the
result of decades of policy push to implement a variety of policies in
the patent system that make it increasingly more difficult to enforce
patents.”
A spokesman for the Patent and Trademark Office said it is committed to
a patent system that serves all U.S. innovators, and that the appeal
board is a “neutral judicial body.”
In 2013, an Apple manager contacted Valencell Inc. about a possible
partnership, according to Valencell. The Raleigh, N.C.-based company had
developed sensing technology that enables heart-rate monitoring when a
user is moving, such as when running. Such technology is essential for
wearable devices that track exercise and health data.
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In the ensuing discussions, Apple repeatedly sought information from
Valencell about its technology and discussed the possibility of
licensing it, testing a prototype for several months, according to
Valencell. Soon before the Apple Watch launched in 2015 with its own
heart-monitoring feature, Apple ended discussions with Valencell.
The following year, Valencell sued Apple in federal district court in
North Carolina, alleging that Apple had violated four of its patents.
Apple filed petitions to the patent appeal board seeking to invalidate
those four patents. Apple also filed another seven petitions against
Valencell patents in areas unrelated to the initial case, according to
Valencell.
Valencell President Steven LeBoeuf said the company, weary of fighting
Apple, settled out of court with it in 2019. He declined to disclose the
terms of the settlement.

An employee works on sensor technology at the Masimo offices. Photo:
Philip Cheung For The Wall Street Journal
Masimo, the developer of blood-oxygen measurement devices, unveiled the
mobile pulse oximeter designed to work as an accessory with Apple
devices at a trade show in 2013.
Adrian Perica, then head of mergers and acquisitions at Apple, told
Masimo executives in an email, seen by The Wall Street Journal, that
Apple wanted to “dig deep” into Masimo’s technology and what the company
had coming next. “Let’s discuss any ideas you have about how Apple could
or should integrate some [of] these technologies in our products,” Mr.
Perica wrote.
A few months later, Mr. Kiani said, he got a call from his chief medical
officer, Michael O’Reilly, informing him he was joining Apple, which he
said had agreed to double his salary and pay him millions in Apple
shares. Mr. O’Reilly didn’t respond to requests for comment.
Mr. Kiani said Apple urged him not to worry about the hiring of Mr.
O’Reilly, and the two companies continued to talk about potential plans.
Apple went on to hire 30 of Masimo’s employees, he said.
In 2014, Apple hired Marcelo Lamego, a former Masimo employee who was
chief technical officer at Masimo spinoff company Cercacor Laboratories
Inc., which licenses Masimo’s technology. In an email before he was
hired, Mr. Lamego told Mr. Cook that he could “add a significant value”
to Apple “without conflicting with the large IP I have developed for
Masimo and Cercacor during the same period.” Mr. Lamego didn’t respond
to requests for comment.
In 2020, Masimo sued Apple in federal district court in Southern
California, accusing the company of gaining access to proprietary
information by hiring Masimo employees. The trial is under way now.
In 2021, Masimo also filed a patent-infringement complaint against Apple
before the International Trade Commission. In January, a commission
judge issued an initial finding that some models of the Apple Watch had
infringed on one of Masimo’s patents. The investigation is expected to
be completed by next month.
According to Mr. Kiani, Apple continues to try to hire Masimo employees.
Apple said it doesn’t specifically target Masimo employees.
Mr. Kiani said that Masimo has so far spent $55 million on its lawsuits
against Apple and defending its patents before the appeal board. He
estimates it is likely to cost his company more than $100 million in the
end.
Write to Aaron Tilley at aaron.tilley-at-wsj.com
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