Discussion ARM vs Qualcomm: The Lawsuit Begins

[gdansk]

I find it puzzling that a licensee of ARM is refusing to renegotiate

Qualcomm has a good track record with lawsuits. Their lawyers possibly even read the contract. It most likely isn't an accident but a calculation based on the exact terms of the contract which I suspect are more in their favor than ARM intended.

 

[adroc_thurston]

Qualcomm has a good track record with lawsuits

Because they hold the lion's share of RF patent chest.
Unfortunately, aa64 the ISA belongs not to them.

 

[ikjadoon]

My understanding was that the license agreement that Nuvia and ARM originally agreed to was based on Nuvia selling server chips. The agreement was tailored to that expectation (read - low volume). When Qualcomm bought Nuvia, it was expected that they renegotiate the terms with ARM now that Qualcomm was going to repurpose the IP to sell chips for phones/laptops/desktops (much higher volume).

I find it puzzling that a licensee of ARM is refusing to renegotiate, as if they hold the cards in this battle. ARM, as owner of the IP, has the right to dictate the terms of the licenses, just like Qualcomm knows it has the right to dictate the terms of their licenses, no matter how unfair it appears to be (to Apple). Don't know why they think they can have it both ways.

I admit this is my baseline understanding. Because other Arm ALA licensees have been bought / sold without any of this. But, in the end, we need to see the ALAs and, well, go through litigation to interpret what the ALAs mean.

Intel absorbed StrongARM from DEC.
Apple bought PA Semi Intrinsity.
Amazon bought Annapurna Labs.
Google bought AgniLux.

But, as you point out, the target market shift may mean a large $$$ shift, too, so then companies start really looking at their contracts.

//

Reuters has updated with new quotes:

William Abbey, Arm's chief marketing officer, was the first witness. He told jurors Arm had terminated the Nuvia agreement rather than consent to transfer it to Qualcomm and that Arm was justified in doing so.

Qualcomm's attorney, Bill Isaacson, tried to show the jury that Abbey's testimony had shifted since he was questioned under oath in a deposition in 2023, when Abbey testified that Nuvia, not Arm, terminated the licensing agreement.

"You say things you don’t fully recollect," he told the eight jurors, referring to the 2023 testimony. "I made a mistake.”

 

[The Hardcard]

I admit this is my baseline understanding. Because other Arm ALA licensees have been bought / sold without any of this. But, in the end, we need to see the ALAs and, well, go through litigation to interpret what the ALAs mean.

Intel absorbed StrongARM from DEC.
Apple bought PA Semi.
Amazon bought Annapurna Labs.
Google bought AgniLux.

But, as you point out, the target market shift may mean a large $$$ shift, too, so then companies start really looking at their contracts.

//

Reuters has updated with new quotes:

Did PA Semi have an ARM license? Their procesor was PowerPC.

 

[soresu]

Did PA Semi have an ARM license? Their procesor was PowerPC.

Nope, I think they were bought exclusively for the teams µArch expertise to build their internal custom core design division.

Also, apart from Keller there was another CPU engineer at PA Semi called Daniel W. Dobberpuhl who worked on StrongARM and DEC Alpha 21064.

Interestingly Keller actually moved to Apple shortly before they acquired PA Semi, which would seem to imply that he put in a good word for their competence.

(sort of like a vastly more positive variation of the Steve Ballmer / Nokia saga 😅)

 

[soresu]

Google bought AgniLux.

Interesting mix of Sanskrit and Latin in the name there.

FireLight 🔥🔆

 

[soresu]

Interestingly AgniLux was actually formed from former PA Semi employees who didn't get along after Apple acquired them, including the Dan Dobberpuhl I mentioned above.

 

[poke01]

Unfortunately, aa64 the ISA belongs not to them.

Unfortunate for Qualcomm and good for us. Can you imagine if QC hold the rights to aa64?

Total mobile monopoly

 

[Doug S]

ARM rely massively on the uplift from Apple, as well as other big tech companies like Google. If they keep throwing their weight around and others get serious about switching ISAs they're in trouble, regardless of what they're saying here. ARM just aren't big enough to go it alone and maintain that ecosystem solo.

Why in the world would this dispute or any amount of ARM "throwing their weight around" cause Apple to switch ISAs? They have renewed their ALA until after 2040, there is nothing ARM could possibly do that would hurt Apple. Even if everyone else left ARM it wouldn't affect Apple.

 

[Doug S]

Because they hold the lion's share of RF patent chest.
Unfortunately, aa64 the ISA belongs not to them.

Yes it is easy to win lawsuits when the IP is in your favor. Qualcomm's track record with previous lawsuits means nothing here.

 

[gdansk]

Yes it is easy to win lawsuits when the IP is in your favor. Qualcomm's track record with previous lawsuits means nothing here.

It has a lot to do with why they would be this bold. I doubt it is stupidity, they would have settled by now if it was some mistake. It is confidence from past success and QC thinks they had some basis in existing agreements to do what they did.

 

[ikjadoon]

Did PA Semi have an ARM license? Their procesor was PowerPC.

No, you're right, PA Semi was PowerPC. I was thinking of Apple acquiring Intrinsity, who had a deal with Arm, but my memory was again wrong: Intrinsity optimized Arm's cores, but I don't see evidence they actually had an Arm ALA.

I think that scratches out AgniLux, too, as there's so little on them.

It seems like not too many ALAs have needed to activate this change of control / consent provision.

//

Reuters has again updated their article; Arm's CEO testified today:

Arm has argued its contracts have long required customers negotiate some license terms when they buy a firm that also uses Arm's technology.

“We’ve never had an issue like this,” Arm Chief Executive Rene Haas said on the witness stand.

On direct questioning from an Arm attorney, Haas focused on the licensing dispute and efforts to reassure customers the lawsuit was not a dramatic change in Arm's strategy. He also told jurors that he told customers there was a risk in using Nuvia technology, given the litigation.

Qualcomm's attorney used cross examination of Haas to focus on internal documents and communications to show there was worry over losing tens of millions of dollars in annual revenue due to the Qualcomm deal for Nuvia.

 

[lakedude]

William Abbey, Arm's chief marketing officer, was the first witness. He told jurors Arm had terminated the Nuvia agreement rather than consent to transfer it to Qualcomm and that Arm was justified in doing so.

Qualcomm's attorney, Bill Isaacson, tried to show the jury that Abbey's testimony had shifted since he was questioned under oath in a deposition in 2023, when Abbey testified that Nuvia, not Arm, terminated the licensing agreement.

Whoops! Seems like a big blunder, they should have had their story straight by now...

 

[ikjadoon]

Whoops! Seems like a big blunder, they should have had their story straight by now...

That appeared very weird, even to me who's tried to keep up with the case. If I remember, I'll go back to the deposition and look for this slip. Slip of tongue or slip of memory or slip of truth? But, surely, the documents should be obvious: I don't think both of them cancelled the ALA at the same time.

How a jury interpreted that—and much else—will be curious. I wish we had the Court transcript (and the depositions in full; most are still heavily redacted).

//

TBH, I've spent maybe ~20 hours over two years reading these Court records. In the end, sure, it's not an esoteric legal principle (what does X or Y mean in this contract; did party A do X or Y?), but combine the legal jargon and contract jargon and technical jargon: the evidence, testimony, depositions, etc. will be a minefield for any normal person to sieve through. Godspeed, jurors: I don't envy being either Arm or Qualcomm this week.

//

Reuters has updated their story again, with new quotes. Trial may wrap up by Thursday, a day early. A rocket docket, folks.

At the trial in U.S. federal court in Delaware on Monday, jurors were shown documents that indicated Nuvia's royalty rates were "many multiples" more than Qualcomm's, and allowing Qualcomm to pay the lower rates would have damaged Arm's business model.

Qualcomm's acquisition of Nuvia potentially trimmed $50 million from Arm revenue, according to estimates in internal documents that were shown to the jury.

"We've never had an issue like this," Haas told the court.

During a cross-examination of Haas, Qualcomm's attorney tried to portray the royalty dispute with Qualcomm as part of a strategy for Arm to confront a customer that it increasingly viewed as a competitor.

Qualcomm's legal team showed a document that Haas prepared for Arm's board outlining a strategy for Arm to start designing its own chips, which would pit it against Qualcomm and other Arm customers.

Haas was dismissive of the documents. He said that Arm doesn't build chips and never got into the business but said he is always considering various possible strategies.

"That’s all I think about, is the future," he told the eight-person jury.

Qualcomm's attorneys also questioned Haas over letters that Arm sent to dozens of Qualcomm's customers, including Samsung Electronics (005930.KS), opens new tab. The letters said the Arm dispute could result in the forced destruction of Nuvia technology, against Qualcomm's demands.

A Qualcomm attorney called those letters "misleading" and many chip industry insiders have wondered whether Arm's appetite for destruction would disrupt Qualcomm's ability to supply chips to the PC industry.

"I felt we had a reason," Haas said. "We were getting lots of questions from partners and customers at almost every meeting with senior executives."

Arm is expected to call its final witnesses on Tuesday and show some video from depositions before it rests. Qualcomm might call its CEO Cristiano Amon.

The judge indicated on Monday that the jury might begin deliberations as soon as Thursday.

 

[poke01]

It’s a clear cut case. I hope it’s wrapped up soon

 

[jdubs03]

It’s a clear cut case. I hope it’s wrapped up soon

Even if it is, it’s not ending until Friday.

 

[lakedude]

...combine the legal jargon and contract jargon and technical jargon: the evidence, testimony, depositions, etc. will be a minefield for any normal person...

Exactly so. It is going to come down to trust and feelings, which makes Will Abbey's blunder very significant. He might have singlehandedly lost the case!

Normal people listening to tech jargon:

 

[Doug S]

It has a lot to do with why they would be this bold. I doubt it is stupidity, they would have settled by now if it was some mistake. It is confidence from past success and QC thinks they had some basis in existing agreements to do what they did.

When both companies are willing to go to trial without settling it is because both believe they are in the right and will win. One is wrong, and will take a big stock price hit soon.

 

[Tuna-Fish]

It’s a clear cut case.

Why do you think so? The case hinges on the specific wordings of the various ALA contracts, and no-one outside QC and ARM know those as of right now.

 

[FlameTail]

Why do you think so? The case hinges on the specific wordings of the various ALA contracts, and no-one outside QC and ARM know those as of right now.

The judges know them, I think. Several clauses from the ALA are present in the court documents, but they have all been censored for the public.

 

[FlameTail]

ARM and Qualcomm right now:

Spoiler

 

[Tuna-Fish]

The judges know them, I think. Several clauses from the ALA are present in the court documents, but they have all been censored for the public.

Yes, of course. I was referring to the public, that is, us and every commentator talking about it. I have read a lot of opinions about how one side or the other is sure to win, all posted by people who cannot possibly know who is in the right here. It comes down to specific wording in a few key contracts.

 

[FlameTail]

Forbes article contains more details:

Arm Squares Off Against Qualcomm: Day 1

After eight months, both companies let the negotiations lapse and discontinued communication until Arm notified Qualcomm of the intent to terminate the Nuvia license

www.forbes.com

This part stuck out to me:

Among the suggestions by Arm was not letting the Nuvia engineers work on Arm designs for three years

They wanted the Nuvia engineers to sit around and do nothing for 3 years? Are they mad?

 

[EV9]

Forbes article contains more details:

Arm Squares Off Against Qualcomm: Day 1

After eight months, both companies let the negotiations lapse and discontinued communication until Arm notified Qualcomm of the intent to terminate the Nuvia license

www.forbes.com

This part stuck out to me:

They wanted the Nuvia engineers to sit around and do nothing for 3 years? Are they mad?

A brilliant plan to force those engineers to work on something else for the next three years. Like perhaps a high-performance RISC-V processor for smartphones, tablets, laptops etc.

 

[GTracing]

This part stuck out to me:

They wanted the Nuvia engineers to sit around and do nothing for 3 years? Are they mad?

This is what irks me about ARM's position on the matter. Destroying designs is one thing, but the idea that ARM would get to dictate what the engineers can work on is rediculous. It basically boils down to ARM having a non-compete contract for employees that don't even work for them. That's not to say Qualcomm is blameless here, but what ARM is suggesting would basically kill the career of anyone on the team.

Ian Cutress talked about this in a podcast he did with Chester Lam (paraphrasing).

ARM sent notice to Qualcomm that the Nuvia ALA was no longer in effect. The "ALA" being the architecture license. And that all IP made under that ALA had to be destroyed. Now the thing is you can't destroy memories. And I don't mean DRAM. I mean in your head. Right, there are lessons learned. And Qualcomm's position from that point on was essentially to say anything the Nuvia team are doing is denuvo brand new from acquisition. Which was the smart messaging to say I'm pretty sure.

So now if you go dig into the Pacer which is Public Access for court electronic records. There's a few re heavily redacted documents that point to evidence that ARM has that Qualcomm did not actually destroy the IP, regardless of memory or not. There's a fine line between destroying something, and not using it. So and in this case the remedy of the lawsuit is to destroy everything, but also everything derived yes so that would be not just X Elite and 8 Elite but anything after as well.