Qualcomm’s RISC Pays Off; Arm’s Dogs Don’t Bark
The verdict(s) in the Qualcomm vs Arm trial are in
In Qualcomm RISCs, Arm Pulls, published in November last year, we examined the background to the legal dispute between Arm and Qualcomm arising from the latter’s acquisition of Nuvia in 2021.
As a quick recap, Nuvia was a startup that set out to design Arm compatible CPU cores for use in servers. It was acquired by Qualcomm for $1.4bn in 2021 and Nuvia’s technology was repurposed by Qualcomm for use in laptops, smartphones and for other applications. Arm sued Qualcomm in August 2022.
In that earlier post we considered Arm’s justifications for suing Qualcomm: because they believed that Qualcomm’s and Nuvia’s Arm licenses did not permit the transfer to Qualcomm of Arm compatible processor designs created whilst Nuvia was still an independent company. As we discussed, Qualcomm has gone on to use these designs as the starting point for the processors in the latest Snapdragon System-on-Chips.
We also considered the commercial rationale for this legal action; that Qualcomm’s actions would be expected to:
lead to a significant reduction in the licensing fees it pays to Arm;
give it control a material portion of the high-performance Arm application processor market at Arm’s expense.
Qualcomm wasn’t messing around …
The case was considered by a jury in the Delaware Court of Chancery last December and the verdicts were delivered on 20 December 2024.
The reaction from the press was unequivocal, for example Bloomberg’s headline was:
Qualcomm Defeats Arm's Claim Over Chip Design License Breach
The full picture, though, is a little more complex than this headline would seem to imply.
Arm unequivocally lost on two of the questions that were put to the jury, with the jury deciding that:
Qualcomm did not breach the terms of Nuvia’s Arm license;
Qualcomm’s products that use Nuvia technology are covered by Qualcomm’s Arm license.
Whilst the jury was unable to decide on a third claim:
Whether Nuvia breached the terms of their Arm license.
I don’t think that there is much doubt that Qualcomm’s legal team enjoyed their Xmas turkey a lot more than Arm’s.
In the rest of this post we’ll try to understand why the jury found as they did, what we found out in the course of the trial, and what might happen next.
As always with posts that cover current issues: this is not investment advice and I am not a lawyer. This is very much a personal perspective on what is a complex case. Please seek appropriate, qualified advice before taking any action.
If you’re not familiar with this case then I’d suggest revisiting that earlier post.
In any event, a quick reminder of two pieces of terminology that are key to this case:
A Technology License Agreement (TLA) is a license for a firm to use an Arm-designed processor;
An Architecture License Agreement (ALA) is a license for a firm to create (and sell chips using) the Arm architecture.
So onto the results of the case.
I wasn’t at the trial, so credit and thanks to the sources listed at the end of this post and particularly to Trantra Analyst and Forbes who each provided excellent coverage.
Why Arm Lost
I have to admit that I was a little surprised at the fact that Arm lost, and it seems that most other commentators thought the same. So why did I get it wrong?