Chip licensing dispute escalates, Qualcomm (QCOM.US) and Arm (ARM.US) go to court

Qualcomm (QCOM.US) and Arm Holdings (ARM.US) will go to court this week to argue over a licensing agreement involving Arm's intellectual property, which were once long-time partners.

The trial began Monday and is expected to last for about a week, with the judge hearing testimony from Arm CEO Rene Haas and Qualcomm CEO Cristiano Amon.

The legal dispute began in 2022, when Arm accused Qualcomm of breaching a contract and infringing on its trademarks after the US chipmaker bought Nuvia, a startup that was also an Arm licensee, for $1.4 billion.

The lawsuit alleged that Qualcomm transferred Nuvia's licenses without Arm's consent and used Arm's intellectual property without its permission. But one of Arm's biggest customers, Qualcomm, argued that existing licensing agreements covered Nuvia's business.

Akash Palkhiwala, Qualcomm's chief financial officer, said in a call last month: "From our perspective, we have very broad and comprehensive rights that cover our custom-designed CPUs. So we are very confident that these rights will be affirmed."

Arm, which is owned by SoftBank Holdings, wants the court to order Qualcomm to destroy products that infringe on its intellectual property. The UK chip design company also sent a 60-day notice to Qualcomm in October to cancel its chip design licensing agreement, which is set to expire next week.

Wolfe Research said in October that it believed Arm's notice was "an attempt to gain leverage in negotiations — but this may not be the final outcome."