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This week, attorneys for Arm (ARM, Financial) and Qualcomm (QCOM, Financial) questioned a former Apple (AAPL, Financial) executive in a Delaware federal court over intellectual property ownership of chip designs based on Arm's computing architecture. The case has major implications for Qualcomm's entry into the laptop market, where it's working with Microsoft to undercut Apple's technological supremacy after the debut of Apple's custom silicon.
The Qualcomm-Nuvia fray is over the chip design startup co-founded in 2019 by former Apple engineer Gerard Williams, which sold for $1.4 billion. The question is whether Nuvia's designs for its own Arm chip are derivative of Arm's architecture and, therefore, require Arm's licensing terms. However, in cross-examining Williams, a computer science major, with ease, Arm's attorneys argued that its licensing agreement explicitly covers modifications and derivatives, arguing it shouldn't be responsible for Williams' work.
Williams said that while his team started with Arm architecture, the Nuvia final designs included "one or less than one percent" of Arm technology. But he acknowledged that contract language could support Arm's version. To counter Arm's claims, Qualcomm's attorney stressed Nuvia's design independence of chips.
The global chip market is further based around Arm's architecture, which is used across smartphones and increasingly in laptops and data centers. Arm, meanwhile, gets about $300 million a year in royalties from Qualcomm, and its executives have argued that gunning for the Nuvia acquisition deprives Qualcomm of $50 million in additional revenue a year.
A jury verdict in the case could set a licensing precedent that would greatly shape Qualcomm's growth strategy in a competitive chip industry.
This article first appeared on GuruFocus.