With the end of testimony on the third day of the Qualcomm/Arm trial, all that remained were closing arguments, jury instructions and their deliberations. Since the jury had not yet reached a verdict after several hours, deliberations will continue on Friday.

In addition, testimony for the counterclaim regarding Arm’s use of Nuvia design proposals has not yet been completed and will continue after the holiday recess, which would take place on or after the court resumes on January 3, 2025. If the jury fails to reach a verdict today while not confirmed, it is expected that trials will continue on January 3rd. So I’m taking this opportunity to report on the fourth day’s negotiations and reflect on some of the lessons learned through the process.

Disclosure: My company, Tirias Research, has advised Arm, Qualcomm, and other companies mentioned in this article.

ForbesArm takes on Qualcomm: Day 3From Jim McGregor

The jury is out

Procedurally, Arm, the plaintiff, made its closing arguments, followed by Qualcomm, the defendant. Closing arguments were followed by a rebuttal by Arm, and Qualcomm was permitted to present a brief rebuttal because the third question the jury is deciding relates to Qualcomm’s counterclaim. The three statements the jury was asked to decide on were (note that these are summarized):

1. Has Arm demonstrated that Nuvia violated Section 15.1(a) of the Nuvia Architecture License Agreement (ALA)? Section 15.1a is the termination provision of the Agreement, which requires that use of any Arm Technology be discontinued and all related materials and designs destroyed.
2. Has Arm proven that Qualcomm violated the Nuvia ALA?
3. Has Qualcomm proven that Qualcomm CPUs are covered by the Qualcomm ALA? Counterclaim from Qualcomm

Arm’s closing argument focused on the Nuvia-ALA agreement. Arm went line by line through several sections of the Nuvia-ALA agreement and compared them with expert testimony, primarily from Qualcomm and Nuvia employees. Arm also made arguments against Qualcomm’s claims made throughout the trial.

Qualcomm’s closing argument was a more impassioned argument about Arm’s claims, destruction of intellectual property (IP) that required significant engineering effort to develop, and a timeline of events surrounding Nuvia and Qualcomm’s legal actions and CPU designs . Qualcomm argued that the designs and information transferred to Qualcomm at the time of the transaction were Nuvia IP, which comprised only 1% of the Arm IP, which were the opcodes that the hardware -Connect microarchitecture with the Arm software instruction set architecture (ISA). Qualcomm also argued that these opcodes were periodically regenerated and that the original code was not yet included in the design at the time it received the termination notice or in future Qualcomm CPU designs that began after the acquisition. Qualcomm also argued that Qualcomm CPU designs were covered by the Qualcomm ALA, which formed the basis of the counterclaim. Qualcomm also based its argument on statements, primarily from Arm.

Both sides also used highly selective testimony to undermine the credibility of some experts and demonstrate the opposing party’s intent in their closing arguments.

Immediately after the conclusion of arguments, the judge read the jury instructions and the jury was sequestered under guard. Since there is little to do while waiting for a verdict, this is a good time to highlight some of the lessons that emerged from the trial.

ForbesArm takes on Qualcomm: Day 2From Jim McGregor

Insights from the process

The most interesting thing about a civil lawsuit between two companies is the confidential information that is made public, and this case is no different. Information made public included details of Arm contracts, Qualcomm roadmaps and design information, as well as the parties’ behind-the-scenes communications through letters, emails, internal presentations and chats.

Below are some of the insights gleaned from the witness statements and documents:

• Arm has, or at least had, an official program called Picasso to try to increase royalties. Tariff increases for Qualcomm, Arm’s largest licensee, were in the 300% to 400% range. Therefore, it is likely that Arm will seek to obtain similar increases from other licensees.
• Qualcomm launched four CPU design projects after the Nuvia acquisition: Hamoa for computers (mainly laptop PCs), Pakala for mobile devices (mainly smartphones), Nordschleife for automotive, and Pegasus for future computing and mobile applications. The Hamoa and Pakala based SoCs are now shipping.
• There was disagreement within Arm about how to respond to the Nuvia acquisition. Some of the old guard, including then-CEO Simon Segars and chief architect Richard Grisenthwaite, took a more supportive stance, while others took a combative approach.
• After acquiring Nuvia, Arm appeared to be aggressive in its dealings with Qualcomm. This included pushing for the acquisition of the Nuvia ALA, a renegotiation of the Qualcomm ALA, and a campaign to 37 current and potential Qualcomm customers with inaccurate statements and information. This “pressure” on Qualcomm was even encouraged by CEO Masayoshi Son.
• Qualcomm appeared to act in good faith during and after the Nuvia acquisition, including paying royalties for its Hamoa and Pakala-based chipsets. However, Arm returned the money. No evidence was presented that Qualcomm attempted to deceive Arm. Qualcomm does not appear to have had direct access to the Nuvia ALA before the acquisition was completed and had no reason to believe that it was materially different from the Qualcomm ALA, which provides broad coverage of all custom IPs developed by or for Qualcomm and none at Acquisitions bound requirements from Qualcomm.
• Qualcomm’s ALA license runs until 2028 and the company has the option to extend it for an additional five years for an additional fee of $1 million/year.
• Arm has been thinking about building complete processors for some time and has also talked about building a processor for Samsung. This is presumably intended to compete with internal development projects of its ALA licensees. It is understood Arm would not sell chips on the open market because they would compete directly with Arm’s TLA customers, the most profitable part of Arm’s business.
• Arm gave no evidence of harm to its business until shortly before the trial, and at that point the judge did not allow the company to be brought into the trial. According to Arm, no damage occurred until the units were delivered. These are the Hanoa-based Snapdragon SoCs for PCs and the Pakala-based Snapdragon mobile SoCs for next-generation Android smartphones.
• The Nuvia ALA appears to contain conflicting clauses and atypical requirements, which ultimately led to the lawsuit with Qualcomm. Had the Nuvia ALA been more clearly worded with terms and conditions, the potential for many of the controversial points would have been significantly reduced.

As the relationship between the two companies deteriorates, Qualcomm may need to consider using a different architecture before its ALA expires in 2033. Even if Arm offers a new license, the terms are likely to be less favorable given the recent history between the two companies and the goals of Arm management. Note that Qualcomm has a license to use the latest Armv9 architecture.

ForbesArm takes on Qualcomm: Day 1From Jim McGregor

Insights from analysts

So far I have tried to keep my own analysis and opinions out of my reporting on the trial, but there are a few points worth raising.

• I’m not a lawyer, but I’m a little surprised that the validity of the “right to approve a purchase clause” hasn’t been questioned or found unenforceable. This clause could impact the valuation and operations of the company, especially a startup, and have no value to the company itself. According to the testimony, certain provisions, of which I assume this was one, were granted to Arm in exchange for a reduced royalty. However, according to the statement, Nuvia paid what it believed to be the full price for a license fee.
• Another point that was missing from the statement or escaped me was that a microarchitecture is not hard-wired to an ISA and vice versa. While it may require some optimization to the microarchitecture (the silicon design), you can move from supporting one ISA to another, and there are several industry examples that could be spotted.

ForbesArm is taking on Qualcomm in a case with far-reaching implicationsFrom Jim McGregor

Final thoughts

As a technologist, I can understand the challenge of this case. This is about more than just the contract terms, it is essentially about the associated technology and chip design. In this case, lawyers present a case using technical experts and attempt to impart their technical knowledge to a group of people who likely have little or no technical knowledge. As a result, both parties relied on analogies, Arm using a piano analogy and Qualcomm using a building analogy. None of these were completely accurate or effective, but every analogy is subject to interpretation.

As I have already emphasized, the outcome of this case will depend on how the jury interprets the contract and the information presented, and it is impossible to predict. However, regardless of the balance in this case, it will likely impact future technology licensing agreements and raise concerns across the Arm ecosystem about possible competition with Arm, particularly among ALA licensees. It could also accelerate the development of alternative ISA ecosystems such as RISC-V, which are already gaining momentum.