Name: The inventor behind Apple’s watch shutdown discusses lawsuit and proxy battle
Uploaded: 2024-05-07
Duration: 7 min 28 s
Description: Joe Kiani, cofounder and CEO of med tech company Masimo, opens up about the company’s ongoing legal battle with Apple over alleged patent infringement and trade-secret theft, as well as the proxy battle he's currently embroiled in with his board. Note: Apple continues to deny Masimo’s IP claims.

Joe Kiani, cofounder and CEO of med tech company Masimo, opens up about the company’s ongoing legal battle with Apple over alleged patent infringement and trade-secret theft, as well as the proxy battle he's currently embroiled in with his board. Note: Apple continues to deny Masimo’s IP claims.

The inventor behind Apple’s watch shutdown discusses lawsuit and proxy battle

Photo illustration by Fortune. Photo provided by Masimo.

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Joe Kiani, cofounder and CEO of med tech company Masimo, opens up about the company’s ongoing legal battle with Apple over alleged patent infringement and trade-secret theft. Note: Apple continues to deny Masimo’s IP claims.

Joe Kiani, cofounder and CEO of med tech company Masimo, opens up about the company’s ongoing legal battle with Apple. 

I'm, your affiliation has changed a little bit. Yeah. Yeah. Let's just say I don't buy Apple products anymore. Welcome to Leadership. Next, the podcast about the changing rules of business leadership. I'm Alan Murray and I'm Mia, I uh started Massimo in 1989 in my condominium that had an attached garage. So I guess it was a real garage start up. I had just gotten my masters in the area of adaptive filters and A I signal processing. And before starting Massimo, I had a consulting job where I was working for another company to make a, a low-cost pulse flexy while I was trying to develop this cheap pulse oximetry for them. I realized when I moved with the probe on my finger, my oxygen saturation would go from 98 to 100% 70 or 60%. And I knew my physiology hadn't changed. It was just a small motion of my hand. I set out to solve that problem. I know I knew about a class of filters known as adaptive filters that could figure out uh what frequencies to let in and what frequencies to block. Kind of like your noise canceling headphones. Um And I thought I could use that to get rid of this NBA noise where my motion was in the same bandwidth as the signal we were looking for. I took a $40,000 loan on my condominium. Uh and then friends and family invested another $80,000 several months later. And with that, we created basketball. And today we're a publicly traded company with nearly $2 billion in revenue and about 10,000 employees. I'm gonna ask you the Apple question. I know your company, you and your company have come up against some, some pretty significant challenges. And, and I want to hear uh again a little bit of an origin, origin story of just uh the, the legal battle with Apple and how that started. Take us back if, if you don't mind, we introduced a product called IP 02, which was the first pulse oximetry for the smartphones. A few months later, we got a call from Apple uh saying, hey, we want to meet with you, you guys are the platinum of noninvasive monitoring and we'll sign an ND A come tell us everything we want to work with you. So I was excited. I really wanted to work with Apple and I went there personally with a couple of my team members and spent half a day with them. Uh The meeting went really well and I thought we're gonna work together. But unfortunately, a few months later uh I learned that they're trying to recruit my team. They ended up taking 25 of my team members or CTO. Fast forward. In 2019, I saw six patents issued to Apple. All impulsive symmetry, all with our chief technical officer that used to work for our sister company, uh Willow Circle Corps and one of the, the disclosures, well, all of them were on our stuff. One of them was a trade secret. It wasn't even something we patented. So at that point, we decided to sue them for trade secret and later patent infringement. Fortunately, the uh it's not, I can't say it's a happy ending because we're not done, done yet, but we got a win, a major win at the ITC Apple's watches with Pulse Symmetry were enjoined in the US. Um And they're appealing it, I don't think they're gonna win the appeal. We have a really strong case. Uh But uh we're waiting for that. That's probably about a year away, but there's still a couple of trials left to go and uh hopefully we'll ultimately get our justice. There's this ongoing proxy battle now, um which we can get into, I'm sure you love this topic. Um But, but tell me first about the acquisition because it's a really interesting one for you guys. I mean, audio in general, um which you just talked about, I think would surprise some people. But how did the acquisition come about for Sound United. We've been working on our wearables and the Hears for many, many years, maybe 15 years as it was emerging, ready to come out. We try to create our own team, uh president of Consumer Business salesforce and it was daunting slow. And finally, one of our board members, Julie Simer. She said, Joe, if you really are serious about these products, you're gonna have to acquire a company that's already in the consumer space. We ended up buying Sound United because it had not only some of the features, we were looking for a team that had a focus on sales and marketing to consumers, about 3 400 people, engineering uh team that was really good at audio and we were getting into the hears. So we wanted that but they also had relationships across the world with retailers in the consumer space like Best Buy, we ended up buying them for about one time revenue with positive cash flow. It was non diluted from day one and uh we loved some of the products they had, they were iconic brands, high-end brands that we thought would sustain for maybe a century if needed to. Your shareholders weren't as enthusiastic about this acquisition. Did that catch you by surprise? What did you make of it? It did, it did because I'm not new to this. I just, we're celebrating our 35th anniversary and it's not the first time I took on a giant and we beat them and we won. So I believe my track record would put them at ease that I haven't lost my mind. There's a new large opportunity. We're gonna go from a $10 billion.10 total available market to like 100 and $50 billion.10. And with good reasons why we should be a major player in those spaces like continuous monitoring. Why people buy these wearables most of the time they're buying it for the health sensing and there's about a third of the population that buy these smart watches that have chronic illnesses. So I thought once we explain where we're going and I knew we're going to consumer space and they understood why we bought it. They would appreciate it. Um, unfortunately, yeah, you're right. They did not. I think uh I learned the hard way that while we have some shareholders that may have been with us for a decade, they make that decision on an annual basis. It's not like they decide they're going to be in it for 10 years. If it keeps raising the price goes up on the stock, 10 15% a year, they're happy and they keep staying in their stock. They didn't want to take a step back to jump 10 steps forward. Uh So I think there's a mismatch. I run Massimo as though it's gonna be around another 100 years and I need to figure out how to make sure it's there 100 years from now. And I think our investors invest in Massimo thinking about the year ahead and uh that kind of took them. Um I think out of that mode because they knew there would be some investment period before we would uh come out with great results.