Fortune Article

Apple Inc. is accused of stealing trade secrets and improperly using Masimo Corp. inventions related to health monitoring in its Apple Watch.

Masimo, which develops signal processing technology for health-care monitors, and its spinoff, Cercacor Laboratories Inc., claim in a lawsuit that Apple got secret information under the guise of a working relationship and then hired away key employees, including Michael O’Reilly, who became vice president of Apple’s health technology efforts.

The business segment that includes the Apple Watch, Apple TV and Beats headphones is the company’s fastest-growing category and generated more than $24 billion in sales in the fiscal year that ended in September.

Masimo and Cercacor said their technology for non-invasive monitoring using light was key to Apple overcoming performance issues with its Watch. Among the 10 patents Apple is accused of infringing are ones covering ways to measure oxygen levels in blood, and heart rate using light emitters and detectors.

The companies are seeking orders that would block further use of their patented inventions in the Apple Watch 4 and 5, return of confidential information and unspecified damages.

Officials with Cupertino, California-based Apple didn’t immediately return queries seeking comment.

Apple contacted Masimo in 2013 and asked to meet for a potential collaboration, according to the complaint filed in federal court in Santa Ana, California. Apple said it wanted “to understand more about Masimo’s technology to potentially integrate that technology into Apple’s products,” Masimo said.

After what Masimo thought were productive meetings, Apple instead hired O’Reilly, who was then Masimo’s chief medical officer and was “privy to extremely sensitive information,” according to the suit.

The next year, it hired Marcelo Lamego, who was Cercacor’s chief technology officer and a former Masimo scientist. Lamego had “unfettered access” to confidential technical information and, shortly after starting work at Apple, began pursuing patent applications for things that he learned at the companies. Apple knew it was getting confidential information from the two men, the companies said.

“Given what appeared to be a targeted effort to obtain information and expertise from Masimo and Cercacor, Masimo and Cercacor warned Apple about respecting their rights,” the companies said in the complaint.

Neither man was named as a defendant in the suit.

Masimo and Cercacor also are seeking to add their engineers to seven patents and applications that were issued to Lemego. That would make Masimo and Cercacor owners, or at least joint owners, of those patents and applications currently assigned to Apple.

It’s not the first time that Apple’s faced allegations of strong-arming information from companies that thought they were working with the tech giant. In October, it was accused of stealing patented technology from an email developer and then removing the man’s messaging service from its App Store so it wouldn’t be a competitor.

Apple has also been accused of incorporating another’s patented invention into its Watch without paying. Last month, a New York cardiologist filed a lawsuit saying Apple owes him royalties on the Watch feature that provides notifications of an irregular heartbeat.

The case is Masimo Corp. v. Apple Inc., 20-48, U.S. District Court for the Central District of California (Santa Ana).