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Arm could force Qualcomm ( QCOM ) to destroy Nuvia technology

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Arm says Qualcomm ( QCOM ) violated their licensing agreement

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Qualcomm ( QCOM ) argues Arm's new CEO seeks higher royalties

By Tom Hals

Dec 19 (Reuters) - Lawyers for Arm Holdings

and Qualcomm ( QCOM ) are set to make closing arguments

on Friday in a case that could upend Qualcomm's ( QCOM ) push into the PC

market with a chip meant to rival Apple ( AAPL ) and Intel ( INTC ) on speed.

An eight-person jury in a U.S. federal court in Delaware

will determine whether Qualcomm ( QCOM ) or Nuvia, a startup Qualcomm ( QCOM )

purchased for $1.4 billion in 2021, breached a license agreement

with U.K.-based Arm, which supplies intellectual property to

both firms.

If Arm is victorious, the British firm could force Qualcomm ( QCOM )

to destroy the technology it purchased from Nuvia, which has

become the basis of a chip released this year that Microsoft ( MSFT )

and the entire Windows PC industry had hoped would claw

back market share lost to Apple ( AAPL ).

The dispute centers on the royalties that chip companies pay

on each semiconductor made using Arm's technology. Before its

acquisition by Qualcomm ( QCOM ), Nuvia's license agreement required it

to pay far higher royalty rates than Qualcomm ( QCOM ).

After Qualcomm ( QCOM ) bought Nuvia, it aimed to use Nuvia's

technology in its chips while paying the lower royalties due

under its own agreement with Arm. Arm objected, kicking off a

dispute that led Arm to sue Qualcomm ( QCOM ) in 2022.

In a trial that started Monday, Arm sought to portray

Qualcomm's ( QCOM ) moves as a first-of-its-kind flouting of standard

contractual terms the British company had used successfully for

decades and that would have upended its business model.

Qualcomm ( QCOM ), by contrast, portrayed Arm as a longtime vendor

whose new CEO had ambitions to reap higher royalty rates and

compete against Qualcomm ( QCOM ) by starting to design its own chip.

Documents and testimony also showed that San Diego,

California-based Qualcomm ( QCOM ) estimated it could eventually save

$1.4 billion per year in payments to Arm by switching to Nuvia's

technology as it pushed into new markets. Its executives

repeatedly testified that their plans did not violate license

agreements.

The jury must determine if Qualcomm ( QCOM ) and Nuvia breached the

deals and whether Arm met its obligations under the agreements.

During the trial, jurors were shown contract language

that appeared to give Arm sweeping license rights to products

built using its instructions, which could have implications for

Arm's agreements with other chipmakers. Qualcomm ( QCOM ) executives

testified that such a reading of the language ignored that its

license covered the extensive design work done by Qualcomm ( QCOM )

engineers to create almost entirely new products.

A verdict in the trial, which started on Monday and was set

to last five days, could come as early as Thursday.