❯ Qualcomm and Arm return to court in Delaware, with Qualcomm seeking up to five years free of royalty payments

A five-day jury trialThe contract dispute between Qualcomm and Arm went to trial on October 5 in US federal court in Delaware before Judge Maryellen Noreika, with the jury trial expected to run five days and the judge hearing part of the dispute separately. Reuters reports that Qualcomm wants to stop paying Arm royalties for up to five years, a demand that could be worth billions of dollars.

Two allegationsQualcomm says Arm failed to provide chip-testing tools required by contract and leaked to the press its 2024 threat to terminate a key license, damaging Qualcomm’s chip deal with Meta and cutting its value by $170 million. Arm denies any breach, saying Meta sought to adjust the terms on its own after shifting focus from VR headsets to AI glasses, and that Qualcomm was “not harmed in the least.”

The real fight is the price increaseIn court, Qualcomm’s lawyer kept returning to a chart showing Arm seeking an 1,800% increase in royalties between version 9 and version 10 of its computing architecture. Under the two companies’ 2013 agreement, royalties were capped at $1.88 per chip. Arm licenses its computing architecture to chip designers such as Qualcomm and collects a royalty per chip. The part the judge is hearing separately is whether Arm negotiated in good faith over next-generation technology.

A lawsuit between major partnersAs Lawyer Monthly lays out, Qualcomm filed this suit in April 2024. Arm had sued Qualcomm in 2022 over its acquisition of chip company Nuvia; a December 2024 jury verdict favored Qualcomm and an appeal is pending. Qualcomm accounted for 9% of Arm’s total revenue in the fiscal year ended this March.

▮ SIGNALArm wants royalties that match what chips are worth in the AI era, while one of its largest customers is in court asking to pay nothing for five years, putting the pricing power of architecture licensing to a direct test.