According to Zhitong Finance APP, this week, a crucial legal dispute is intensifying between the Global semiconductor manufacturing giants Arm Holdings (ARM.US) and Qualcomm (QCOM.US) in the federal court of Delaware. This dispute over intellectual property could profoundly affect the future trajectory of both companies and potentially trigger a chain reaction throughout the entire Technology industry. The core of the dispute lies in Qualcomm's acquisition of the semiconductor startup Nuvia in 2021 and its subsequent licensing agreement to use Arm technology. Arm accuses Qualcomm of using its intellectual property without authorization and demands the destruction of related chip designs.

It is understood that Qualcomm, as one of Arm's long-term partners and largest customers, hopes to enter the computer processor market through Nuvia's products. However, Arm believes that Qualcomm's actions violate the original licensing agreement between the two parties, prompting a request for renegotiation, and accuses Qualcomm of transferring Nuvia's license without its consent. Qualcomm argues that it has signed a separate technology licensing agreement with Arm that sufficiently covers the work obtained through its acquisition of Nuvia.

The dispute began in 2022 when Arm filed a lawsuit against Qualcomm for breach of contract and trademark infringement. Qualcomm's Chief Financial Officer, Akash Palkhiwala, stated that Qualcomm possesses extensive and comprehensive licensing rights, covering its custom-designed CPUs, and is confident about the outcome of this lawsuit. In contrast, Arm hopes the court will order Qualcomm to destroy the infringing products and sent a notice to Qualcomm in October of this year to revoke the chip design licensing agreement, which will expire next week.

During the trial, executives from both sides appeared as witnesses. Arm's CEO, Rene Haas, emphasized the necessity of protecting the company's intellectual property, while Qualcomm's lawyer argued that Qualcomm has always respected the contract and that its licensing agreement is impeccable.

Arm is attempting to showcase its influence in the chip design field through this lawsuit, while Qualcomm aims to maintain its technological independence and reduce reliance on Arm designs. Arm stated that it will negotiate specific contractual terms for the use of its technology with each company separately. For emerging businesses like Nuvia, the financial terms offered by Arm are usually more lenient compared to established companies like Qualcomm, which claims that its existing licensing scope already covers the relevant intellectual property.

This year, Arm decided to revoke Qualcomm's authorization, citing that Qualcomm did not renegotiate the contract terms after acquiring Nuvia. In response, Qualcomm rebutted that it has not violated any regulations, but rather that Arm is attempting to unfairly force it to pay higher fees. Both companies declined to comment prior to the trial.

In addition to a licensing dispute valued at approximately $1.5 billion, the case also highlights the intensifying competition between two companies that previously had a close relationship. Qualcomm, as the largest chip supplier in the Smart Phone market, uses Arm's technology in most of its chips. However, as Arm gradually transforms into a chip supplier, the competitive relationship between the two companies has become increasingly strained.

The patent dispute between Arm and Qualcomm escalates: both CEOs will personally testify in court.

Reportedly, under the leadership of Rene Haas, Arm is actively transforming to become a chip supplier rather than just a technology provider. However, this strategic shift has intensified competition between Arm and Qualcomm, as Qualcomm has been seeking technological differentiation and strives to reduce its reliance on Arm designs.

In the opening argument of the trial, Arm's lawyer Daralyn Durie pointed out to the jury: "The other side attempts to steal our code without being willing to pay for it."

Qualcomm, headquartered in San Diego, acquired Nuvia to strengthen its technological capabilities and introduce more powerful chips for the high-end application market. This is part of CEO Cristiano Amon's ambitious plan to expand the business landscape, moving from the Smart Phone industry into the laptop chip market to capture more market share.

Notably, both CEOs, Amon and Haas, will personally testify to defend their respective companies' positions.

In fact, this is not the first conflict between Qualcomm and Arm. As early as 2020, NVIDIA announced plans to acquire Arm for $40 billion, a move that immediately sparked strong dissatisfaction from companies like Qualcomm. Several Semiconductor companies opposed this, and ultimately, the deal was forced to be abandoned due to a joint obstruction by regulatory agencies in the USA, China, and Europe.

As one of the opponents, Qualcomm expressed concerns to global regulatory agencies, believing that NVIDIA might prioritize the use of Arm technology and even completely cut off competitors' access. Although NVIDIA denied this and promised to maintain open access to Arm designs, these concerns were eventually taken seriously and addressed by the regulatory agencies.

For Arm, the failure of this acquisition attempt not only cuts off Qualcomm's existing licenses but also serves as a strong proof of this United Kingdom company's influence in the chip design field. After all, chip design is crucial to the entire Semiconductors Industry.

According to Tamlin Bason and Kunjan Sobhani of Bloomberg Industry Research, it is likely that both companies will reach a settlement before the jury makes a ruling, and Qualcomm may pay a higher licensing fee to continue using Arm's technology.

In terms of court litigation, Qualcomm has a good track record in computer chip patent litigation. For example, in the 2019 patent licensing dispute with Apple, Qualcomm successfully reached a favorable settlement.

The reason the Arm versus Qualcomm case is being heard in Delaware is that Qualcomm is registered in that state. And as the location of nearly 70% of Fortune 500 companies, Delaware's federal court is also one of the centers for patent infringement and licensing litigation in the USA. In 2021, this court became the second busiest patent court in the USA, second only to the federal court in the Western District of Texas.

The case number is Arm v. Qualcomm, 22-cv-01146, and is currently being heard in the District Court for the District of Delaware (Wilmington).