So many threads about this over the past year and half but I think it's worth repeating.
The Masimo patents that the ITC said Apple infringed were not granted until after the Apple Watch gained blood oxygen monitoring. The reason Masimo has prior patent rights is nuanced but essentially has to do with some earlier patents that date from around 2008 but did not cover the Apple Watch. At trial all but one juror found in favor of Apple, and there was a mistrial. Apple is appealing the ITC decision so we need to see how that goes but if Masimo has anything on Apple Watch patent-wise it is paper thin IMHO.
In any event, Apple says that they got permission to do this from Customs, which enforces the ban. So it would seem that Apple is not infringing the Masimo patents with this update. Waiting to hear what Masimo has to say about all of this.