When a potential juror last week was asked what she thought about Irvine-based Masimo Corp. suing Apple Inc., the world’s most valuable publicly traded company, she brought up an ancient battle.
“It does seem like a David versus Goliath kind of case,” she said last week at the start of a trial being held at the Ronald Reagan Federal Building and U.S. Courthouse in Santa Ana.
The trial, expected to last three weeks, is a case that could have wide ramifications for the future of both the technology and medtech industries.
Apple (Nasdaq: AAPL) is clearly the Goliath in the legal battle, with a $2.6 trillion market cap. It reported almost $400 billion in annual sales during its fiscal 2022. It also has $21 billion in cash and another $30.8 billion in marketable securities as of Dec. 31.
By contrast, Masimo (Nasdaq: MASI) has a $9.6 billion market cap, fifth largest for a public company based in Orange County. It reported $2 billion in sales in 2022; it had $200 million in cash as of Dec. 31.
Masimo is suing Apple for $3.1 billion, alleging that the Cupertino-based tech giant stole technology for its watches to monitor oxygen levels.
The company is seeking a permanent injunction to prevent Apple from selling watches with Masimo technology.
Buyout Considered
In the first day alone, the case revealed secrets from both companies.
Email correspondence among Apple employees referred to Masimo CEO Joe Kiani as having a Steve Jobs-like reputation within the medical technology development space. Apple executives discussed acquiring Masimo and installing Kiani as the VP of Medical Technologies.
Other big names were mentioned during the opening phases of the trial, such as the actor Morgan Freeman, who cut an advertisement for Masimo that was shown during the trial, and former President Bill Clinton, who asked Kiani to help solve the opioid crisis.
There was also talk whether Apple CEO Tim Cook, whose emails on Masimo were discussed at the trial, would make a physical appearance as well.
Kiani, who was the first witness, revealed that while he’s happy with the performance of his new watch called W1, he doesn’t like its look and is experimenting with fancier styles in coming editions.
The trial brought up the old business conundrum of whether valuable employees can leave for a competitor, seen when a key Masimo engineer, Marcelo Lamego, jumped to Apple in 2014.
“It was a big punch in the gut,” Kiani recalled when he learned the news. “We were very close friends. We barbecued together. We’d go to dinner, theater. I wanted him to know everything (about Masimo).”
Job Movement
“Folks are entitled to work wherever they want to work,” Apple lead attorney Joseph Mueller told the jury. “People are allowed to use their talent and expertise that they obtained a lifetime when they moved from job to job. There is nothing wrong with that.”
Mueller, who led a team of 10 lawyers, is a first-chair trial lawyer who has worked on dozens of trials in courts across the country.
A partner in the Boston office of WilmerHale, Mueller’s been honored as an Intellectual Property Trailblazer by The National Law Journal and named the 2021 Boston Lawyer of the Year for Intellectual Property Litigation by Best Lawyers in America.
Mueller told the jury that Apple intended to disprove Masimo’s claims.
“Apple and the folks at Apple did not steal a thing,” he said. “The evidence simply does not support the allegations.”
Masimo’s longtime attorneys, Joseph Re and Stephen Jensen, work for Orange County’s largest law firm, Knobbe Martens, which has 284 attorneys, including 141 at its Irvine headquarters.
The pair have won several big cases for Masimo in the past two decades, collecting hundreds of millions of dollars in settlements from giant medtech companies Royal Philips Electronics NV and Nellcor, now a unit of Medtronic PLC.
In January, the pair won a crucial first round before the International Trade Commission that Apple’s watches illegally used Masimo’s technology for pulse oximetry.
Last November, the pair also won a case against Lamego, as a federal court ordered him to abandon at least 12 patent applications.
Re, in his opening statement against Apple, told jurors that Masimo has invented groundbreaking technology that has basically eliminated false alarms in the monitoring of oxygen levels, helping save the lives of many patients, including preventing blindness in newborn babies.
“It has virtually eliminated blind babies,” Re said.
Masimo “is one of Orange County’s greatest contributions to humanity,” he said.
Re outlined the history of how Apple in 2013 approached Masimo to discuss working together. He noted that Apple is a technology company trying to enter the medtech industry by providing consumers with hospital-grade technology on its watches.
“They were entering a field that they know nothing about,” Re told the jurors. “I bet you didn’t know yesterday that (Apple) was the one that needed technical help.”
David v. Goliath
The eight jurors, all Orange County residents, were unanimous in saying they hadn’t previously heard about Masimo prior to the trial. Judge James V. Selna quipped that Masimo wasn’t the apparel company Mossimo that was founded in Newport Beach in 1986.
The jurors all knew Apple so well that Selna asked them not to wear their Apple watches to the courthouse.
During the opening statements on April 5, the 10th-floor courtroom was crowded with about 100 people, most of whom looked like lawyers.
Perhaps the most poignant moment came when Kiani relayed how he felt betrayed by his two trusted confidants, Dr. Michael O’Reilly, Masimo’s chief medical officer, and Lamego, who joined Apple in 2013 and 2014, respectively.
“I was saddened and disappointed,” Kiani said. “I thought this was the end of our relationship with Apple.”
Kiani told the courtroom that he kept up a friendship with O’Reilly after he left and even helped his wife obtain cancer treatment. According to Kiani, both O’Reilly and Lamego assured him that Apple wasn’t interested in Masimo’s technology.
Kiani learned otherwise in 2019 when he saw patents filed by Apple with Lamego’s name on it. Further evidence told Kiani that he’d been lied to by the pair.
“Once I learned everything, I was shocked,” he told the jurors.
The case is Masimo Corp. v. Apple Inc., C.D. Cal., No. 8:20-cv-48.
