Qualcomm scores key chip trial win against Arm by Reuters

Written by Tom Hales

WILMINGTON, Del. (Reuters) – Qualcomm’s central processors are properly licensed under an agreement with… arm Holdings (NASDAQ:), a jury found in a trial in a US federal court that removed some, but not all, of the uncertainty about the mobile chip maker’s expansion into the laptop market.

A week of courtroom arguments and deliberations ended in a mistrial after the jury failed to solve one of three questions before it in the trial between the two chip giants. Qualcomm (NASDAQ:) said the result confirmed its right to innovate, but ARM pledged to pursue a new experiment.

Arm shares fell 1.8% in extended trading after the news, and Qualcomm shares rose 1.8%.

The outcome means the case could be tried again in the future, something Arm pledged to continue in a statement following the ruling. Judge Marilyn Noreika, who presided over the case in the US Federal Court in Delaware, encouraged Arm and Qualcomm to mediate their dispute.

“I don’t think either side had a clear victory or would have had a clear victory if this case had been tried again,” Noreika told both sides.

After more than nine hours of deliberations over two days, the eight-person jury was unable to reach a unanimous verdict on the question of whether the startup Nuvia violated the terms of its license with Arm.

But the jury found that Qualcomm — which bought Nuvia for $1.4 billion in 2021 — did not violate that license.

The jury also found that Qualcomm’s chips, which were built using Nuvia technology and are key to Qualcomm’s push into the PC market, were properly licensed under its own agreement with Arm, clearing the way for Qualcomm to continue selling them.

“The jury established Qualcomm’s right to innovation and confirmed that all Qualcomm products involved in the case are protected under Qualcomm’s contract with ARM,” Qualcomm said in a statement.

An Arm spokesperson said the company was “disappointed” that the jury could not “reach a consensus” on the company’s claims, and said from the beginning the goal was to protect the company’s intellectual property.

For now, the result paves the way for Qualcomm to continue pushing what it calls “PC AI” in laptop chips meant to handle tasks like chatbots and image generators. This is a market where Nvidia (NASDAQ:), Advanced Micro Devices (NASDAQ:) and MediaTek also plan to make Arm-based processors.

“My biggest concern was what would happen to the future roadmap if Qualcomm no longer had access to Nuvia cores,” said Stacy Rasgon, an analyst at Bernstein. “At this point, that risk is much closer to being off the table.”

The dispute between Arm and Qualcomm centered on the royalty rate Qualcomm must pay for each chip. Nuvia was set to pay higher prices than Qualcomm before Qualcomm bought the startup and wove its technology into chips under its own license with Arm at lower royalty rates.

Ben Bajarin, CEO of technology consulting firm Creative Strategies, said Arm’s current growth forecasts were not based on earning higher rates from Qualcomm as Arm chips enter the personal computer market.

“They didn’t take the win into account with their quarterly (earnings) calls,” Bajarin said. “So none of this changes their economic direction. It’s really just a matter of contractual argument.”

However, the result of the experiment leaves open the question of where ARM technology begins and ends. Arm licenses its computing architecture to companies but also sells designs for computing centers as off-the-shelf products.

Some of Arm’s more sophisticated customers, such as Apple (NASDAQ:), Qualcomm, and Nuvia, license Arm architectures but develop their own custom kernels. During the trial this week, Arm’s lawyers insisted that the terms of its architecture license with Nuvia gave it the right to demand the destruction of core designs intended for Nuvia.

“This has ramifications for the entire industry,” Jim MacGregor of Tereas Research said in an interview. “Whether you’re using the standard Arm core, or developing your own, it has been the rock of everything from electric toothbrushes to satellites.”