Arm demands that Qualcomm “destroy” the pre-acquisition CPU designs from Nuvia in its lawsuit

Qualcomm’s recent purchase of Nuvia gives it a legitimate opportunity to significantly increase Arm’s market share in the server and Windows laptop markets. Qualcomm must first face a lawsuit from… Arm?! before it can go after Intel.

Yes, as reported initially by Reuters (case PDF here), Arm has sued Qualcomm for 1.4 billion related to Qualcomm’s purchase of Nuvia. According to Arm, Qualcomm’s acquisition of Nuvia “forced Arm to terminate Nuvia’s licences, which in turn required Qualcomm and Nuvia to cease using and destroy any Arm-based technology generated under the licences, which was a violation of the terms of the licences’ original agreement. Despite Arm’s warnings, Qualcomm and Nuvia have persisted with their plans to integrate Arm architecture in Nuvia’s products, which is a breach of Arm’s rights as the technology’s originator and licensor.” In response to Qualcomm and Nuvia’s licencing violation, Arm has requested that they “cease using and destroy the relevant Nuvia technology.”

Though Nuvia has yet to sell a single unit, company was created by former Apple SoC department heads. For over a decade, including for the M1 SoC, Gerard Williams III served as Apple’s principal CPU architect; he is currently the CEO of Nuvia and a vice president of Qualcomm Engineering. With the purchase of Nuvia, Qualcomm is following Apple’s lead in trying to bring Arm designs to larger, more powerful devices that traditionally use the x86 architecture.

The complaint claims that both Nuvia and Qualcomm were in possession of a “Architecture License Agreement (ALA),” the highest (and therefore most costly) degree of Arm licencing. Arm does not produce its own chips; rather, the firm makes money by selling licences to other companies that produce semiconductors. It’s common for this to be a licence for a “stock” Arm-made CPU design branded with the “Cortex” name. However, a select group of Arm’s largest customers hold an ALA licence that enables them to create their own Arm chip designs from beginning, rather than relying on an existing Arm design. In order to develop its own Arm-based SoCs, Apple has acquired this licence.

As a result, even though both Nuvia and Qualcomm held the necessary permission to produce bespoke Arm chips, the acquisition of one by the other still presents licencing issues. Arm has issues with the breadth and transferability of the work that was done under Nuvia’s ALA licence, which are also points that Nuvia disputes.

The lawsuit says that “Nuvia’s licensing fees and royalty rates reflected the anticipated scope and nature of Nuvia’s use of the Arm architecture. The licenses safeguarded Arm’s rights and expectations by prohibiting assignment without Arm’s consent, regardless of whether a contemplated assignee had its own Arm licenses.”

Although Nuvia’s original focus was on server central processing units (CPUs), Qualcomm is expanding the company’s offerings to include mobile devices, automobiles, and virtual reality (VR) headsets.

To paraphrase what the arm is saying: “Neither Qualcomm nor Nuvia gave Arm any advance warning of the deal. Neither party had Arm’s approval to assign or transfer the Nuvia licences.” The Arm persists: “Arm promptly notified Qualcomm in writing after the merger announcement that Nuvia could not distribute its licences and that Qualcomm would need Arm’s permission to exploit any in-process designs created by Nuvia under the Nuvia ALA. After Qualcomm acquired Nuvia’s ‘in-process technology’ and licence without permission, Arm spent over a year in negotiations with Qualcomm (via Qualcomm Inc. and Qualcomm Technologies, Inc.) to achieve a settlement.” Negotiations apparently reached an impasse, and legal representation is now required.

As Qualcomm explained to The Verge, “Arm has no authority, contractual or otherwise, to seek to interfere with Qualcomm’s or NUVIA’s technologies,” said general counsel Ann Chaplin. She went on to say that Qualcomm is sure that its rights to licence its custom-designed CPUs would be upheld in court, and that Arm’s case is “ignoring the reality that Qualcomm has extensive, well-established licence rights covering its custom-designed CPUs.”

In the grand scheme of things, Arm going after Qualcomm doesn’t make a whole lot of sense. When it comes to near-term market expansion, Qualcomm and Nuvia are Arm’s best bet, which implies higher royalties for Arm in the future. Qualcomm has said that it intends to employ Nuvia’s Arm designs to compete with Intel and AMD in the laptop and server sectors. Every every smartphone on the market has an Arm processor, and Apple uses Arm processors in all of their products, including in desktop and laptop computers. Arm must be happy that Qualcomm wants to take on Intel in this way, right?

The fact that we’ve arrived here is equally bizarre. Qualcomm and Nuvia, which has ties to Apple, have extensive backgrounds working with Arm. You’d think by now that everybody would know their way around Arm’s licencing rights.