Qualcomm and Arm kick off trial, potential for huge damages in focus

By Tom Hals, Max A. Cherney and Stephen Nellis

WILMINGTON, Delaware, Oct 5 (Reuters) - Chipmaker Qualcomm and chip tech firm Arm Holdings, long at loggerheads, began another trial on Monday with Qualcomm accusing Arm of withholding chip testing tools that were due under contract.

Qualcomm also alleges that Arm leaked to the media its 2024 threat to terminate a vital license agreement in a way that damaged discussions for a chip deal between Qualcomm and Meta Platforms.

In the lawsuit brought before US federal court in Delaware, Qualcomm, one of Arm's largest customers, is seeking to quit paying royalties — potentially worth billions of dollars — to Arm for up to five years.

In Qualcomm's opening statement, attorney Karen Dunn focused the jury's attention on a 2021 acquisition by Qualcomm of chip startup and Arm license holder Nuvia and internal documents she said showed Arm executives were referring to Qualcomm as the "enemy" and feared a collapse in royalty payments. She said Arm responded by breaching contracts and undermining Qualcomm's business relationship with Meta, including using coordinated leaks to the media.

"At the end of the case we'll ask you to ask yourselves what would you do if your entire business depended on someone living up to their promises and contracts," she said.

Arm's attorney Gregg LoCascio said Qualcomm's entire case comes down to using litigation as a form of leverage in a business dispute. He previewed evidence he said showed Qualcomm did not suffer any actual injury from the allegations.

He told the jury that the judge will tell them they cannot find for Qualcomm unless it can prove it was damaged by Arm's conduct.

"They were not harmed in the least," he said.

While a five-year hold on royalty payments sought by Qualcomm could be a major sales impact for Arm, Judge Maryellen Noreika is weighing whether to throw out that term of the contract, which could mean Qualcomm would be able to seek only a smaller amount of damages.

Arm, owned by Japan's SoftBank Group, has denied that it breached the contract and argued that it did not damage Qualcomm's chip deals which it described as speculative.

Arm has also countered that Qualcomm cannot seek damages for the leak of the Arm termination letter because Qualcomm leaked non-public details of antitrust probes into Arm to the media. 

The five-day jury trial will mark yet another stage in the contentious relationship between the two firms.

Arm sued Qualcomm in 2022 alleging that Qualcomm had breached its contracts, though Qualcomm came away in 2024 with a key victory.

In a related bench trial, Noreika will also hear arguments over whether Arm has negotiated in good faith with Qualcomm for the next version of Arm's chip technology. Qualcomm's agreement with Arm runs through 2033.

Qualcomm is a major maker of chips for Android mobile phones but has expanded into other fields such as data center chips.

Arm, which has for decades supplied fundamental chip design technology to Qualcomm and other chip firms such as Nvidia, has become a competitor to those customers by releasing chips of its own.

(Reporting by Tom Hals in Wilmington, Delaware and Max Cherney and Stephen Nellis in San Francisco; Editing by Edwina Gibbs and Nia Williams)