Apple Bet $634M on a Patent System That No Longer Exists

By Babak Akhlaghi on November 21, 2025. A twenty-six page document just cost Apple $634 million.

Think about that. A single patent, barely longer than a college thesis, generated a verdict larger than the value of most companies’ entire physical infrastructure. More than their machinery. More than their real estate.

But the math doesn’t stop there. That verdict just assigned a market value to Masimo’s blood oxygen monitoring patent. Every related patent in their portfolio now carries a higher valuation. The company’s worth to investors just multiplied.

One verdict. Exponential value.

This is how intangible assets work in 2025. And Apple’s $634 million loss reveals something far more significant than a single company’s legal defeat.

The Playbook That Worked Until It Didn’t

Apple didn’t stumble into this verdict by accident. They made a calculated bet based on a strategy that had worked brilliantly for years.

The playbook was simple: if you face a patent infringement claim, challenge the patent’s validity at the USPTO through Inter Partes Review (IPR). Cost? Around $250,000. Success rate? Roughly 80%.

Compare that to licensing fees over the lifetime of a product like the Apple Watch. The math made perfect sense.

Apple used this exact strategy against several of Masimo’s patents. It worked. They invalidated multiple patents through IPR proceedings. The problem was the one patent that survived.

But here’s what makes this case fascinating: Apple didn’t just lose $634 million for infringing one patent. They also lost their playbook.

The Ground has Shifted

Earlier this year, the USPTO began discretionarily denying nearly all newly filed IPRs.

The shift started quietly. A few denials here and there. Then came new guidelines requiring IPR petitions to clearly identify where prior art teaches each element of patent claims. No more hand-waving. No more relying solely on expert testimony to fill gaps.

Then Director Squires signaled something even more fundamental: the USPTO is standing behind the patents it issues.

For companies like Apple, this represents a complete reversal of the environment they’d operated in for years. The 80% invalidation rate that made the “challenge first, license never” strategy viable has effectively dropped to near zero.

The Cost Nobody Talks About

After losing at the ITC earlier, Apple didn’t simply accept defeat and license the technology. They developed workarounds. New versions of their blood oxygen monitoring designed to circumvent Masimo’s patents.

This sounds like innovation. It’s actually degradation.

When you design around a patent rather than licensing the optimal technology, you’re making technical compromises. The workaround is almost certainly inferior to the original implementation.

Consumers are now paying premium prices for Apple Watches with health monitoring features that are technically worse than what Apple originally built. That’s the hidden cost of choosing litigation over licensing.

You wear the consequences of that legal strategy on your wrist.

Why This Changes Everything

The shift at the USPTO benefits all patent holders equally. But it disproportionately empowers smaller companies who rely on patents to compete against corporations with massive market share and marketing budgets.

Big tech companies can succeed through distribution and brand power alone. Smaller innovators need defensible intellectual property.

For years, those smaller companies faced a brutal reality: even if the USPTO granted them a patent, a well-funded competitor could challenge it for $250K with an 80% chance of invalidation. The patent system favored those who could afford to challenge, not those who invented.

That dynamic just reversed.

Now patent challenges move back to federal courts, where patent owners can win actual damages instead of just surviving to fight another day. At the USPTO, the best outcome for a patent owner was having their patent reissued. No compensation for infringement. No deterrent against future violations.

Federal courts offer jury verdicts. Like $634 million verdicts.

The New Innovation Calculus

We’re witnessing a fundamental shift from “build first, ask questions later” to “license first, innovate safely.”

That’s a complete reversal of Silicon Valley’s “move fast and break things” mentality.

I believe we’ll see three simultaneous trends emerge: more aggressive patenting, more licensing partnerships, and more litigation. This seems contradictory until you understand the new strategic landscape.

Companies will patent more because those patents now carry real defensive value. They’ll license more because the cost of infringement has become genuinely prohibitive. And they’ll litigate more because federal court verdicts offer meaningful rewards for patent holders.

The $634 million verdict functions as a pricing signal to the entire market. It tells every tech company that licensing upfront is almost certainly cheaper than infringement later.

For companies developing health monitoring features today, the playbook has completely changed. Patent your key innovations. When facing potential infringement claims, carefully review the patent against your product. If there’s credible infringement risk, negotiate settlement rather than gambling on expensive litigation.

Acquisition will become more common for companies with strong patent portfolios in critical technology areas. But acquisition isn’t always feasible. Masimo is a publicly traded company with its own strategic interests. They may not want to be absorbed into Apple’s ecosystem.

What I really expect is a renaissance of genuine licensing partnerships. Not the kind where companies reluctantly pay after losing in court, but proactive partnerships where both sides recognize mutual benefit.

The tech company gets proven, defensible technology without litigation risk. The innovator gets recurring revenue and IP validation without manufacturing consumer products themselves.

The Complexity We’re Heading Into

Stronger patents create stronger incentives for genuine innovation rather than incremental iteration. If you know your patent will be defensible, you’re more likely to invest in breakthrough research rather than fast-following competitors.

But there’s a cost we’re not seeing yet: patent thickets.

When so many patents exist in a single space that operating becomes nearly impossible without licensing from multiple parties, innovation can actually slow down. You might need licenses from five different companies just to build one feature.

This becomes especially complex in emerging fields where different industries collide. Health tech sits at the intersection of medical device patents, consumer electronics patents, sensor technology patents, and soon, AI patents.

When medical tech, consumer tech, artificial intelligence, and optical sensors all merge into a single product worn on your wrist, who owns what?

The Apple-Masimo case is just the beginning of that conversation.

The real question isn’t whether this shift slows innovation. It’s whether the patent system can keep pace with technological convergence. Whether it can handle the complexity of products that span multiple industries, each with its own patent landscape.

The innovation playbook just got rewritten. The tech industry is watching every move as the story unfolds.

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