Qualcomm Prevails Over Arm in Court. Next, an Appeal.

Qualcomm denied Arm’s claim that it breached license agreements when it acquired Nuvia. A judge agreed. (JOSEP LAGO/AFP via Getty Images)

Key Points

• A federal judge denied Arm Holdings’ request for a complete re-trial in its lawsuit against Qualcomm, disposing of Arm’s final undecided claim.
• The lawsuit stemmed from Qualcomm’s 2021 acquisition of Nuvia, with Arm alleging breaches of license agreements regarding intellectual property reassignment.
• Qualcomm’s general counsel stated that their right to innovate prevailed, while Arm has filed a notice to appeal all rulings in the case.

A federal judge in the District of Delaware on Tuesday put a button on an unusual trial in which Arm Holdings had sued one of its best customers, Qualcomm .

In December, a jury sided with Qualcomm on two questions but could not come to a resolution on the third. Arm asked for a complete re-trial as a result; Judge Maryellen Noreika denied that motion and disposed of Arm’s final undecided claim.

“Our right to innovate prevailed in this case and we hope Arm will return to fair and competitive practices in dealing with the Arm ecosystem,” said Qualcomm general counsel Ann Chaplin in a prepared statement.

Arm has filed a notice to the U.S. Court of Appeals for the Third Circuit, challenging all the rulings in the case.

Arm stock was up 5.6% in midday Wednesday trading, and Qualcomm shares were down by 0.5%.

The case stems from Qualcomm’s 2021 acquisition of Nuvia, a startup founded by Apple alumni to make a central processing unit based on Arm designs. Arm claimed that Qualcomm and Nuvia breached their Arm license agreements when they reassigned Nuvia’s intellectual property to Qualcomm.

For about a year now, that IP has been used throughout Qualcomm’s chips for Android smartphones, computers, and automobiles. Had Qualcomm lost at trial, three years of engineering would have been would have been rendered futile, and current chips might have had to be recalled.

While the jury sided mostly with Qualcomm in the original trial, it could not come to an agreement over whether Nuvia had breached the terms of its license with Arm when it assigned its IP to Qualcomm at the merger. Both litigants were seeking clarity on this issue from the judge. Arm wanted a new trial on all the issues, even those that Qualcomm won. Qualcomm asked that the claim be tossed as a matter of law. Judge Noreika sided with Nuvia and Qualcomm.

Lingering in the background of all this is Apple, which designs its own chips around Arm’s “instruction set,” the most basic level at which hardware and software communicate. But Apple doesn’t use the stock cores, the building blocks of modern CPU chips, that Arm licenses, preferring to use its own. As a result, the main chips in iPhones, iPads, and Macs are best-in-class.

Qualcomm was one of the Arm chip designers watching Apple pull away from them, and to remedy that problem it turned to Nuvia, which had custom CPU designs like Apple’s. Nuvia’s founder was Gerard Williams III, who was previously the lead chip designer at Apple, and he is now the senior vice president of engineering at Qualcomm.

Despite its global reach, the chip-design world can look very small and entangled from the outside.

Write to Adam Levine at adam.levine@barrons.com