Chip design group Arm sues Qualcomm for breach of contract

UK-based chip design group Arm has sued one of its most important customers, Qualcomm, accusing the company of breach of contract and trademark infringement over its attempt to create new chip designs that effectively take it into direct competition with Arm itself.

The lawsuit, filed in federal district court in Delaware on Wednesday, centres on Qualcomm’s rights to use chip designs it acquired after buying chip start-up Nuvia last year.

The $1.4bn purchase of the two-year-old start-up, which was founded by former Apple and Google employees, has been seen as a critical step in Qualcomm’s attempts to design more efficient computer processors, or CPUs, complementing its core strengths in mobile communications.

Besides improving the performance of its smartphone chips, Qualcomm has hoped to use the acquisition to break into the data centre market, selling its own server processors in competition with chip companies such as Intel and Nvidia, as well as tech giants such as Amazon that design their own chips.

The lawsuit, which seeks unspecified damages, could also complicate an important strategic partnership for Qualcomm. Cristiano Amon, the mobile chipmaker’s chief executive, said this year that his company wanted to buy a stake in Arm and create a consortium to acquire it in order to guarantee that its technology remains widely available.

Qualcomm was reported to have been one of the companies that objected to Nvidia’s attempts to buy Arm from Japanese owner SoftBank. The deal was called off this year after regulators objected.

According to the lawsuit, Nuvia’s designs were developed under an Arm architecture licence, which allows other companies to develop basic chip designs based on Arm technology. Arm said Qualcomm had failed in a similar effort to design CPUs of its own under an architecture licence, forcing it instead to buy chip designs directly from Arm under a different form of technology licence.

By using the Nuvia designs without Arm’s permission, Qualcomm was effectively saving itself from having to make purchases of chip designs directly from Arm, the lawsuit alleged.

Amon said this year that if Arm was able in the future to come up with better designs than those from Nuvia, Qualcomm could buy them from Arm instead. That comment “confirmed the negative impact” Qualcomm’s attempt to use Nuvia’s designs would have on Arm’s business, according to the lawsuit.

Qualcomm said in a statement that the lawsuit “marks an unfortunate departure from its longstanding, successful relationship”.

“Arm has no right, contractual or otherwise, to attempt to interfere with Qualcomm’s or Nuvia’s innovations. Arm’s complaint ignores the fact that Qualcomm has broad, well-established license rights covering its custom-designed CPUs, and we are confident those rights will be affirmed,” the company added.