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Arm has lost a battle over licensing of its microprocessor designs to Qualcomm, ending doubt over the immediate future of some of the chip makers products.The jury in the US District Court for the District of Delaware spent the week listening to arguments in the protracted and increasingly rancorous licensing dispute between Arm and Qualcomm over whether Qualcomm is properly licensed to use technology acquired when it bought startup Nuvia in 2021.The verdict, delivered Friday, is hugely significant, not only for the parties involved but for the maze of other companies that have built their product development around their technology, however, the battle is not over yet. Although the jury found that Qualcomm did not breach Nuvias license with Arm, and Qualcomms chips using Nuvia technology are properly licensed, it could not agree on whether Nuvia had breached the terms of its license with Arm. That means there could potentially be yet another trial.After the verdict was delivered, each company released a brief statement.We are pleased with todays decision, Qualcomm said in a press release. The jury has vindicated Qualcomms right to innovate and affirmed that all the Qualcomm products at issue in the case are protected by Qualcomms contract with ARM. We will continue to develop performance-leading, world class products that benefit consumers worldwide, with our incredible Oryon ARM-compliant custom CPUs.But for Arm, the fight isnt over.We are disappointed that the jury was unable to reach consensusacross theclaims, an Arm spokesperson said in an email. We intend to seek a retrial due to the jurys deadlock. From the outset, our top priority has been to protect Arms IP and the unparalleled ecosystem we have built with our valued partners over more than 30 years. As always, we are committed to fostering innovation in our rapidly evolving market and serving our partners while advancing the future of computing.However, instead of a retrial, Judge Maryellen Noreika, who presided over the case, recommended that the two companies try to resolve their differences through mediation, reportedly noting that she doesnt see either company having a clear victory if the case is retried.Its an extraordinary clash between companies that until as recently as 2021 seemed like firm allies.The legal case started with Qualcomms 2021 acquisition of Nuvia, designer of the Phoenix datacenter chip, which used Arms v8.7-A instruction set. Under Qualcomm, the Phoenix was reinvented as the Oryon chip, the CPU core of a more general microprocessor used inside the companys Snapdragon system-on-a-chip (SoC).Importantly, the royalty that Qualcomm agreed to pay under its Architecture License Agreement (ALA) with Arm was lower than that of Nuvia. Qualcomm believed this more favorable deal should apply to Nuvia development going forward because most of its subsequent Snapdragon development was done after the acquisition.Arm disagreed, and argued that Qualcomm should pay the rate agreed with Nuvia. According to court testimony by Arm CEO Rene Haas this week, the lower royalty would cause a drop in revenue of $50 million. Failing to reach an agreement with Qualcomm, the company decided to sue, the first time it has taken such action against a customer since its founding in 1990.This is where things became a bit muddy. Why did Arm decide to sue over a relatively small sum, and why did Qualcomm refuse to concede? This week in court, a wide range of arguments and counter arguments were laid out, mostly saying that each company believed the other was trying to sabotage its business.Make Qualcomm great againAs it attempts to diversify away from relying on mobile chips, Qualcomms Snapdragon SoC platform is seen as critical for its future. This, it hopes, will allow it to take on Intel and AMD in the general microprocessor market while integrating the new-fangled AI capabilities important to the PC sector.In October, Arm cancelled Qualcomms license to the Nuvia ALA. It also demanded the destruction of Nuvia designs developed prior to the merger. Clearly, a verdict in favor of Arm would put Qualcomm in a tight corner, and also a whos who of tech companies Microsoft, Acer, Asus, Dell, HP, Lenovo, and Samsung currently using Qualcomms Snapdragon designs.This week, Qualcomm put forward an alternative view to explain Arms motivations. According to Qualcomms lawyers, Arm harbors ambitions to develop competing chips of its own, making it a direct competitor to Qualcomm. Evidence for this remains circumstantial, but to back this up Qualcomm claimed that Arm at one point misled it into disbanding its development team.Stop being cheapA difficulty for outsiders is untangling exactly what is really at issue and whether theres more to this than meets the eye. According to Arm, its about licensing agreements and the fees that arise from them. It believes Qualcomm used its IP in Nuvia-originated IP and should pay what Nuvia agreed and stop being cheap.Qualcomms argument seems to be that this is a shakedown. And yet there seem to be deeper currents. Perhaps they see each as competitors in the longer term, and the battle is competitive jockeying.Notably, Qualcomm was a major opponent to Nvidias proposed 2021 takeover of Arm, abandoned in the face of regulatory hurdles, and even suggested investing in the UK company. For its part, Arm upset Qualcomm by contacting dozens of its customers to inform them of the termination of the Nuvia license. Each round of conflict deepened the antipathy.Its the sort of dispute that happens all the time in the tech industry, a sector built on patents and cross-licensing of IP. But what was highly unusual about this dispute is that it wasnt resolved without going to court, a hugely risky situation for both parties should they lose.On the surface, it has never been a battle of equals: Qualcomms annual revenue is 10 to 15 times that of Arms. That said, since Arm listed on the New York Stock Exchange, its value has soared, bringing its market capitalization much closer to that of the US company.Arm is important for its size and Qualcomm is large and ambitious. Each would like the others crown. Both are angry. Whats not yet clear is whether the verdict of a Delaware courthouse, including outright victory, will deliver what either company wants.
