Qualcomm achieves a significant victory in the chip litigation against Arm.
A jury in a U.S. federal court determined that Qualcomm's central processors are appropriately licensed under an agreement with Arm Holdings, thereby alleviating some uncertainty regarding the mobile chipmaker's foray into the laptop sector.
The week-long trial concluded in a mistrial after the jury was unable to reach a resolution on one of the three questions presented during the proceedings involving the two semiconductor companies. Qualcomm expressed that the outcome validated its right to innovate, while Arm announced its intention to seek a new trial.
This development indicates that the case may be retried in the future, a pursuit that Arm committed to in a statement following the verdict. Judge Maryellen Noreika, who oversaw the trial in Delaware, urged both parties to consider mediation to resolve their differences. "I don't believe either side achieved a definitive victory, nor would they have if the case were retried," Judge Noreika remarked to the involved parties.
After more than nine hours of deliberation over two days, the eight-member jury could not reach a unanimous decision regarding whether the startup Nuvia had violated its licensing agreement with Arm. However, the jury concluded that Qualcomm, which acquired Nuvia for $1.4 billion in 2021, did not breach that license. Furthermore, the jury determined that Qualcomm's chips, developed using Nuvia technology and essential to Qualcomm's entry into the personal computer market, are properly licensed under its agreement with Arm, thus allowing Qualcomm to continue their sales.
"The jury has upheld Qualcomm's right to innovate and confirmed that all Qualcomm products involved in this case are safeguarded by Qualcomm's contract with Arm," stated Qualcomm in a press release. An Arm representative expressed disappointment that the jury could not reach a consensus on the company's claims, emphasizing that the primary objective has always been to protect the company's intellectual property.
The current outcome enables Qualcomm to advance its vision of the "AI PC" through laptop chips designed for tasks such as chatbots and image generation.
This sector is also being targeted by competitors like Nvidia, Advanced Micro Devices, and MediaTek, who are planning to develop Arm-based processors. Stacy Rasgon, an analyst at Bernstein, expressed concern regarding the future roadmap of Qualcomm in the event that they lost access to Nuvia's computing cores.
However, she noted that this risk now appears to be significantly diminished. The contention between Arm and Qualcomm revolved around the royalty rates that Qualcomm was obligated to pay for each chip. Prior to Qualcomm's acquisition of Nuvia, the startup was expected to pay higher rates, but after the acquisition, Qualcomm integrated Nuvia's technology into its chips under a license with Arm that allowed for lower royalty payments.
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Ben Bajarin, CEO of Creative Strategies, remarked that Arm's current growth forecasts do not rely on obtaining higher rates from Qualcomm as Arm chips penetrate the PC market. He pointed out that Arm has not included any potential gains from Qualcomm in its quarterly earnings discussions, indicating that the situation is primarily a contractual dispute. Nevertheless, the trial's outcome raises questions about the boundaries of Arm's technology. Arm licenses its computing architecture to various companies while also offering designs for computing cores as standard products.
Some of Arm's more advanced clients, including Apple, Qualcomm, and Nuvia, license Arm's architectures but create their own custom cores. During the trial, Arm's legal representatives asserted that their licensing agreement with Nuvia granted them the authority to demand the destruction of Nuvia's custom core designs. Jim McGregor from Tirias Research commented that this situation has significant implications for the entire industry. He noted that whether companies utilize a standard Arm core or develop their own, it has been foundational to the entire ecosystem.
The legal victory solidifies Qualcomm's position in the PC market, allowing it to continue its AI-based chip development. While the trial ended in a mistrial on some issues, the outcome reduces uncertainty about Qualcomm's use of Nuvia's technology and sets a precedent for future semiconductor licensing disputes.
