Delaware: In a significant development, Qualcomm has successfully defended its licensing agreements in a federal court trial against Arm Holdings. The jury ruled that Qualcomm’s central processors are properly licensed, providing a boost to the mobile chipmaker’s ambitions in the laptop market. However, the trial ended in a mistrial after jurors could not reach a unanimous decision on one of the key questions presented.
Courtroom Proceedings
After a week of arguments and deliberations, the eight-member jury was unable to agree on whether Nuvia, a startup acquired by Qualcomm for $1.4 billion in 2021, breached its licensing terms with Arm. Nevertheless, the jury confirmed that Qualcomm did not violate its license agreement with Arm and that its chips, utilizing Nuvia technology, are properly licensed. Qualcomm expressed satisfaction with the result, said, “The jury has vindicated Qualcomm’s right to innovate.”
In contrast, Arm expressed disappointment over the jury’s inability to reach consensus on all claims. Arm’s shares dipped by 1.8% in extended trading following the verdict, while Qualcomm’s shares rose by 1.8%. Arm has announced its intention to pursue a new trial.
Implications for Qualcomm
This ruling clears a path for Qualcomm to continue its development of what it refers to as the “AI PC,” targeting laptop chips capable of handling advanced tasks such as chatbots and image generation. The ongoing competition in this space is also marked by Nvidia’s plans to develop Arm-based processors.
Bernstein analyst Stacy Rasgon noted that the ruling significantly reduces concerns about Qualcomm’s future product roadmap, emphasizing that access to Nuvia’s computing cores is crucial for Qualcomm’s innovation trajectory. “At this point, that risk is a lot closer to being off the table,” Rasgon remarked.
Dispute Over Royalty Rates
The core issue in the trial revolved around the royalty rates Qualcomm is obligated to pay for each chip produced. Nuvia was set to pay higher rates prior to its acquisition by Qualcomm. After the merger, Qualcomm integrated Nuvia’s technology into its own chip designs, allowing it to benefit from lower royalty rates under its existing agreement with Arm.
Industry experts have pointed out that Arm’s growth projections do not depend on higher royalty payments from Qualcomm as it seeks to penetrate the PC market. Ben Bajarin, CEO of Creative Strategies, emphasized that Arm’s financial forecasts have not hinged on winning increased rates from Qualcomm.
Industry Ramifications
The outcome of the trial raises broader questions about the delineation of Arm’s technology rights. Arm licenses its computing architecture to various companies and also sells designs for computing cores. During the trial, lawyers for Arm argued that their architecture license with Nuvia allowed them to request the destruction of Nuvia’s custom core designs.
Jim McGregor of Tirias Research commented on the wider implications of the case, Said, “This does have ramifications for the entire industry. Whether you’re using a standard Arm core or developing your own Arm core, it has been the rock of everything from electric toothbrushes to satellites.”
Looking Ahead
As the dispute between Qualcomm and Arm evolves, it remains crucial for both companies to seek a resolution. U.S. District Judge Maryellen Noreika, who oversaw the trial, encouraged both parties to mediate their differences. With potential for a new trial looming, the tech industry will be closely monitoring the developments in this case, which could have lasting impacts on the future of chip manufacturing and licensing agreements.
