Apple-Masimo misappropriated trade secrets fight ends with no jury verdict

By Joe Schneider

Apple Inc. and Masimo Corp. failed to persuade a jury to reach a unanimous verdict in a trial where the medical-devices company claimed a blood-oxygen sensor in the Apple Watch was developed using misappropriated trade secrets.

Masimo sought as much as $1.85 billion, claiming that was the amount of illegal profit Apple earned from using its technology. But jurors in federal court in Santa Ana, California, told the judge Monday they were unable to reach a consensus, with six out of seven panelists voting to clear the iPhone maker of wrongdoing.

“We’re not going to be able to come to a joint conclusion,” the all-female panel wrote in its final note to the judge. Earlier, the jury said six of its members voted for Apple and one for Masimo, and she refused to change her mind. US District Judge James Selna declared a mistrial late Monday afternoon.

It’s unusual for jurors to report on a vote in their closed-door deliberations as judges routinely warn them against doing so.

Masimo shares dropped as much as 5.3% in after-hours trading after the jurors reported their vote before rebounding when the mistrial was declared.

Masimo Corp. and Cercacor Laboratories Inc., a Masimo spinoff that owns certain licensing rights to many Masimo patents, sued Apple claiming it misappropriated trade secrets related to technology that uses light sensors to measure the amount of oxygen in the bloodstream for use in its Apple Watch.

“While we are disappointed that the jury was unable to reach a verdict, we intend to retry the case and continue to pursue legal redress against Apple,” Masimo said in a statement.

Masimo initially sought as much as $3.1 billion, claiming that was the amount Apple improperly benefited from its technology. The judge rejected several of Masimo’s claims before the jury began deliberations, reducing the potential maximum payout Apple faced to $1.85 billion.

Apple poached Masimo and Cercacor employees to learn about its technology after Chief Executive Officer Tim Cook nixed an internal proposal to buy the company, Masimo’s lawyer, Joseph Re, told the jury in closing arguments.

Apple Set for Billion-Dollar Trial in Clash Over Watch Secrets

Apple responded by brining forward numerous employees who had worked on the sensor project, all of whom told the jury during the three-week trial that Masimo’s technology wasn’t used in the development.

In his closing argument, Apple’s lawyer, Joe Mueller, invited the employees one by one to stand, repeating over and over they “told you the truth.”

After the mistrial was declared Apple thanked the jury in a statement.

 “We deeply respect intellectual property and innovation and do not take or use confidential information from other companies,” the company said. “We are pleased that the court correctly rejected half of the plaintiffs’ trade secret allegations, and will now ask the court to dismiss the remaining claims.”

Masimo previewed the next steps in its statement.

“The United States Trade Commission is scheduled in the coming months to decide whether to ban the importation of certain models of the Apple Watch, following a ruling last year by an Administrative Law Judge that Apple infringed one of Masimo’s patents for pulse oximetry,” the company said. 

The 3 1/3 days of jury deliberations were marked by emotion.

In a note last week, the jury said one of the panelists would leave the room and pace the hallway outside, while another juror cried.

A single mother with a temporary job, earning about $25,000 a year, was excused Friday after telling the judge she couldn’t afford to spend another week deliberating because she wasn’t being paid for her time on the jury.

Speaking to Re outside court, one of the jurors was asked by the lawyer what she thought of the trial.

“It was boring,” she replied. “It was like being in school again.”

The case is Masimo Corp. v. Apple Inc., 8:20-cv-00048, US District Court, Central District of California (Santa Ana).

(Updates with shares in fifth paragraph.)

--With assistance from Mark Gurman.