(Bloomberg) -- Qualcomm Inc.’s chief executive officer told a jury that its business suffered when customers were misled by computer-chip designer Arm Holdings Plc about the companies’ licensing agreement for chip technology vital to the electronics ecosystem.
Cristiano Amon, who was chosen in 2021 to head Qualcomm, took the witness stand Wednesday in a licensing dispute that threatens to roil the technology industry.
He testified that Arm needlessly “created uncertainty” among Qualcomm’s customers — including mobile-phone maker Samsung Electronics Co. — by duping them into thinking that a license to use Arm’s technology will expire in 2025. Samsung became concerned that access to Qualcomm’s chips, which it uses in its phones, might be cut off, he said.
“That was not good for Qualcomm, our customers, or frankly, for Arm,” Amon told jurors in federal court in Wilmington, Delaware. He said the license actually runs until 2033.
Qualcomm is one of Arm’s biggest customers and a longtime partner, but they’ve grown increasingly at odds. At the heart of their legal fight is Qualcomm’s 2021 acquisition of chip startup Nuvia for $1.4 billion and a licensing agreement to use Arm’s technology.
Arm claims the agreement it had with Nuvia should have been renegotiated after that acquisition, and it demanded that Qualcomm destroy designs acquired in the buyout. San Diego-based Qualcomm, which is relying on Nuvia’s technology to push into the computer-processor market, argues it has a separate license for Arm technology that covered its work.
The dispute is important to the chip industry because many of the world’s biggest tech companies rely on chip architecture licensed from Arm and Qualcomm to power their products. Analyst Jim McGregor, a partner at Tirias Research, has said the jury’s decision could impact intellectual-property licensing agreements going forward, as well as contract law governing the tech industry.
UK-based Arm, which is majority-owned by Japan’s SoftBank Group Corp., sells chip designs and licenses a so-called instruction set — code used by software to communicate with processors.
Under cross-examination Wednesday, Amon said Qualcomm will honor valid licensing commitments despite the falling-out with Arm. Asked whether business frictions justified breaching its pact with Arm, Amon said, “I don’t think companies should do that.”
Amon rebutted Arm’s claim that Qualcomm knew it needed permission to deploy technology acquired in the Nuvia acquisition, saying the company’s existing deal with Arm didn’t impose that requirement. The case turns on whether the wording of the licensing agreement required consent from Arm to use the Nuvia innovations.
Qualcomm’s CEO said it was “outrageous” that Arm canceled the Nuvia license and demanded that his company destroy all innovations gained in the deal. He said it was virtually unheard of for a tech company to demand the destruction of technology already paid for under a license.
Closing arguments are expected in the case on Thursday. Afterward, the jury of five women and three men will begin deliberations.
The case is Arm v. Qualcomm, 22-cv-01146, US District Court, District of Delaware (Wilmington).
--With assistance from Ian King.
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