Qualcomm claims trial win in dispute with Arm over chip design licences

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

Arm vowed to seek a retrial, however, because of what it called a “deadlock”, as jurors failed to reach a decision on one of the three questions they were asked to answer — setting the stage for more litigation or a potential settlement.

After the jury delivered its partial verdict on Friday, the Delaware federal judge overseeing the case told Arm and Qualcomm to talk to a mediator.

Arm’s case alleged Qualcomm breached a chip design licence when it bought Nuvia. It filed the lawsuit against one of its biggest customers in 2022 in what it said was a last-resort move to protect its intellectual property.

Jurors had been asked to answer three questions: whether Nuvia had breached the licence it had with Arm, whether Qualcomm had breached Nuvia’s licence with Arm and whether Qualcomm’s licence covered the chip technology that Arm had disputed.

While it found in Qualcomm’s favour on the second and third questions, the jury was unable to reach a verdict on whether Nuvia had breached its own licence with Arm.

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

Arm said would seek a retrial based on the fact that the jury was “unable to reach consensus across the claims”.

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

The failure of two of the biggest chip companies in the world to reach a settlement before the case reached trial had surprised analysts.

“It is clear that Qualcomm came out on top,” said Prakash Sangam, founder and principal analyst at tech consultancy Tantra Analyst, who was present throughout the trial. “Two of the three questions were a unanimous decision in their favour, and the judge made it clear that she was not keen on a quick retrial.”

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

Arm and Qualcomm have historically been allies, with the UK group providing the architecture upon which the US company builds its chips. Their legal dispute began with Qualcomm’s $1.4bn acquisition of chip start-up Nuvia in 2021.

Arm accused Qualcomm of using intellectual property it had licensed to Nuvia, saying it had failed to meet a contractual obligation to secure its consent to reassign Nuvia’s own Arm licence.

Qualcomm argued its licence with Arm covered the disputed technology and that Arm was squeezing it for higher royalty rates. Arm chief executive Rene Haas and Qualcomm chief executive Cristiano Amon both testified this week at the jury trial, which started on Monday.

The trial drew back the curtain on the long-running tensions between the two companies over the millions of dollars in fees that Qualcomm pays Arm each year to use its chip designs. This led to a bitter breakdown in their relationship.

Arm presented evidence that suggested Qualcomm calculated it could save hundreds of millions of dollars in annual licence fees to the UK company if it acquired Nuvia.

Qualcomm had been seeking to design custom chip “cores” in-house, reducing its reliance on Arm’s premade designs as it pushed into the PC market. This factored into the $1.4bn price tag that Qualcomm was willing to pay for Nuvia, according to internal company documents shown to the jury.

Qualcomm meanwhile presented evidence of the close relationship between Haas and Masayoshi Son, the chief executive of SoftBank, and their discussions around the company’s plan to boost royalties revenues following the Japanese group’s acquisition of Arm in 2016.