Qualcomm wins lawsuit in dispute with Arm over chip design licenses

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Qualcomm claimed victory over Arm after a U.S. jury ruled largely in its favor on Friday in a long-running dispute over its 2021 acquisition of chip company Nuvia.

However, Arm said it would seek a retrial because a so-called “deadlock” had occurred as jurors were unable to reach a decision on any of the three questions they were asked to answer – paving the way for further litigation or a possible settlement .

After the jury reached its partial verdict on Friday, the Delaware federal judge overseeing the case ordered Arm and Qualcomm to speak to a mediator.

Arm’s case alleged that Qualcomm violated a chip design license when it bought Nuvia. The company filed the lawsuit against one of its largest customers in 2022, calling it a last resort to protect its intellectual property.

The jury was asked to answer three questions: whether Nuvia had violated the license it had with Arm, whether Qualcomm had violated Nuvia’s license with Arm, and whether Qualcomm’s license covered the chip technology that Arm disputed.

While the jury found in favor of Qualcomm on the second and third questions, it could not reach a verdict on whether Nuvia had violated its own license with Arm.

Qualcomm said it was satisfied with the verdict. The jury “affirmed Qualcomm’s right to innovate” and confirmed that the products at issue in the case were protected by its existing contract with Arm, it said.

Arm said he would seek a retrial because the jury was “unable to reach a consensus on the claims.”

“From the outset, our top priority has been to protect Arm’s intellectual property and the unparalleled ecosystem we have built with our valued partners over more than 30 years,” it continued.

Analysts were surprised that two of the world’s largest chip companies failed to reach an agreement before the case went to court.

“It’s clear that Qualcomm is ahead,” said Prakash Sangam, founder and chief analyst at technology consulting firm Tantra Analyst, who was present throughout the process. “Two of the three questions were unanimously in her favor, and the judge made it clear that she was not interested in a quick retrial.”

The dispute threatened widespread disruption as a range of new artificial intelligence-focused consumer devices using Qualcomm chips hit the market – including PCs from Microsoft and Dell and smartphones from Samsung. Arm had attempted to destroy the allegedly infringing products.

Arm and Qualcomm have always been allies, with the British group providing the architecture on which the US company builds its chips. Their legal battle began with Qualcomm’s $1.4 billion acquisition of chip startup Nuvia in 2021.

Arm accused Qualcomm of exploiting intellectual property it had licensed to Nuvia and said it had failed to fulfill a contractual obligation to obtain its consent to reassign Nuvia’s own Arm license.

Qualcomm argued that its license with Arm covered the controversial technology and that Arm was pressuring it with higher license fees. Arm CEO Rene Haas and Qualcomm CEO Cristiano Amon both testified this week in the jury trial that began Monday.

The trial exposed long-standing tensions between the two companies over the millions of dollars in fees Qualcomm pays Arm each year to use its chip designs. This led to the bitter failure of their relationship.

Arm presented evidence suggesting that Qualcomm calculated that it could save the British company hundreds of millions of dollars in annual licensing fees if it acquired Nuvia.

Qualcomm had been trying to develop custom chip “cores” in-house to reduce its reliance on Arm’s pre-built designs as the company moved into the PC market. That took into account the $1.4 billion price Qualcomm was willing to pay for Nuvia, according to internal company documents presented to the jury.

Qualcomm, meanwhile, presented evidence of the close relationship between Haas and SoftBank Chief Executive Masayoshi Son and their discussions about the company’s plan to increase licensing revenue following the Japanese group’s 2016 acquisition of Arm.