Philips pays $300M, inks pact to end Masimo patent fight

Philips ($PHG) and Masimo ($MASI) have struck an agreement to end their long-running patent fight. The multipart pact puts the legal scrap between Philips and Masimo to bed while setting them up to combine their respective expertise in patient monitoring and noninvasive sensors.

Having secured the deal, Philips will integrate Masimo technology to monitor brain function, track oxygen saturation and take gas samples into its IntelliVue line of products. The partners have also agreed to co-market rainbow and other noninvasive sensor technologies from Masimo alongside Philips’ patient monitoring systems in North America and parts of Asia and Europe. Philips has committed to certain, publicly-undisclosed marketing and integration activities, too.

The partnership tightens the ties between complementary technologies. When paired to a Philips' monitors, Masimo’s noninvasive rainbow SET delivers continuous total hemoglobin (SpHb) readouts to clinicians. Rainbow SET works by analyzing different wavelengths of light to measure SpHb, oxygen and other biomarkers. Philips monitors display the data and, depending on the model, share them with clinical information systems.

Philips has long recognized the value of pairing its monitors with noninvasive ways of taking blood oxygen levels and pulse rates, but in the past this caused it to clash, not collaborate, with Masimo. The legal tussle between the companies dates back to 2009, when Masimo took Philips to court over alleged infringements of two of its patents. In 2014, a jury sided with Masimo and ordered Philips to pay $467 million. A federal court upheld the decision upon appeal last year.

Masimo previously said it spent years “unsuccessfully trying to reach an out-of-court solution” with Philips. Now, with the $467 million fine still hanging over it, Philips has reached an agreement. The settlement releases Philips from paying the $467 million. Instead, the Dutch health technology firm is paying Masimo $300 million in cash and potentially delivering a boost to its new partner’s prospects through marketing and integration activities.