The reason is sensible enough. Swatch has its own line of watches, called "iSwatch". The similarity between "iWatch" and "iSwatch" is significant enough to confuse customers between the two, hence Swatch wants to block Apple from trademarking "iWatch" in the countries where the iSwatch is sold. Perhaps Apple should have tried harder to keep the "iSomething" naming pattern for itself, even though it's not its - the company iRobot preceeded the iMac's birth by eight years.
Apple has already trademarked the Iwatch in some countries, including Japan, Mexico, and Turkey, which means Swatch has a fair share of work on the desk. In addition, Cupertino reportedly looked into collaborating with Swatch and other watch building experts from Switzerland, but couldn't convince them to join its efforts.