Day 4 Closing and Insights

With the trial’s third day of testimony complete, all that remains is closing arguments, jury instructions, and jury deliberations. After several hours, no verdict was reached, and jury deliberations will continue today. Additionally, counterclaim testimony regarding Arm’s use of the Nuvia design proposal has not been completed and is expected to continue beyond the holidays and is expected to take place on or after the court resumes on January 3, 2025. be. If the jury does not reach a verdict today, deliberations are expected to continue on January 3, as this has not been confirmed. I would therefore like to take this opportunity to highlight Day 4 of the proceedings and reflect on some of the insights gained throughout the trial.

Disclosure: My company, Tirias Research, consults for Arm, Qualcomm, and other companies mentioned in this article.

jury is closed

Procedurally, the plaintiff, Arm, made closing arguments, followed by the defendant, Qualcomm. Closing arguments were followed by Arm’s rebuttal, and because the third question the jury decided on was related to Qualcomm’s counterclaim, Qualcomm was allowed to make a brief rebuttal. The three statements the jury was instructed to rule on were (note these have been condensed):

1. Has Arm proven that Nuvia violated Section 15.1(a) of the Nuvia Architecture License Agreement (ALA)? Section 15.1a is a termination clause that requires you to cease using the Arm Technology and destroy all associated materials and designs.
2. Did Arm prove that Qualcomm violated the Nuvia ALA?
3. Has Qualcomm certified that Qualcomm CPUs are covered by Qualcomm ALA? Qualcomm’s counterclaim

Mr. Arm’s closing argument focused on the Nuvia ALA agreement. Arm reviewed several sections of the Nuvia ALA contract line by line and cross-checked it with expert testimony primarily from Qualcomm and Nuvia staff. Arm also refuted Qualcomm’s claims throughout the trial.

Qualcomm’s closing arguments include what Arm is asking for, the destruction of intellectual property (IP) that required significant technical effort to develop, and the chronology of events related to the lawsuit and Nubia and Qualcomm’s CPU designs. The discussion became more heated. Qualcomm claimed that the design and information transferred to Qualcomm during the transaction was Nuvia IP that contained only 1% of Arm IP, the opcode that links the hardware microarchitecture to the Arm software instruction set architecture (ISA). Qualcomm also claims that these opcodes are regularly regenerated and that the original code was not in the design at the time it received the termination notice or in the design of future Qualcomm CPUs begun after the acquisition. did. Qualcomm also claims that Qualcomm’s CPU designs are covered by the Qualcomm ALA, which is the basis of the counterclaim. Qualcomm also relied primarily on testimony from Arm to support its claims.

Both sides also used highly selective testimony to undermine the credibility of some expert witnesses and to try to substantiate the other party’s intentions in closing arguments.

Immediately after closing arguments, the judge read out instructions to the jury, who were then sequestered under security. Since there is little to do while awaiting sentencing, we would like to take this opportunity to highlight some of the insights gained from the trial.

Insights from the trial

The most interesting part of civil trials between two companies is the confidential information that is made public, and this case is no exception. The information released to the public included details of the Arm contract, Qualcomm’s roadmap and design information, and behind-the-scenes communications between the parties through letters, emails, internal presentations, chat, and more. Ta.

Below are some of the insights gleaned from testimonies and documents.

• Arm has, or at least had, an official program called “Picasso” that attempts to increase royalty rates. The increases for Qualcomm, Arm’s largest licensee, ranged from 300% to 400%. As a result, Arm is believed to be seeking similar increases from other licensees.
• Qualcomm began working on four CPU designs after acquiring Nuvia. Hamoa for computing (mainly laptops), Pakala for mobile (mainly smartphones), Nordschleife for automotive, and Pegasus for future computing and mobile applications. Hamoa and Pakala based SoCs are shipping now.
• There was disagreement within Arm about how to respond to the Nuvia acquisition. Some traditional conservatives, such as then-CEO Simon Segers and chief architect Richard Grissenthwaite, have taken a more supportive stance, while others have taken a more combative approach. there was.
• After acquiring Nuvia, Arm appears to have been proactive in its deal with Qualcomm. This includes pushing to underwrite the Nuvia ALA, renegotiating the Qualcomm ALA, and campaigning against 37 current and potential Qualcomm customers with inaccurate statements and information. This “pressure” on Qualcomm was also promoted by Chairman of the Board Masayoshi Son.
• Qualcomm appeared to be operating with integrity during and after the Nuvia acquisition, paying royalties on Hamoa and Pakala-based chipsets. But Arm returned the funds. No evidence was presented that Qualcomm tried to deceive Arm. Qualcomm appears to have had no direct access to Nuvia ALA prior to completing the acquisition, and that it covers a wide range of custom IP developed by or for Qualcomm and does not provide requirements associated with the acquisition for Qualcomm ALA. There was no reason to believe that it would be much different. Qualcomm’s.
• Qualcomm’s ALA license has been extended through 2028, and the company has an option to extend it for an additional five years for an additional $1 million per year.
• Arm has been considering developing a complete processor for some time, and has even discussed building one for Samsung. This is likely due to competing internal development projects by ALA licensees. It is speculated that Arm will not sell the chips on the open market because it will be in direct competition with Arm’s TLA customers, which are the most profitable part of Arm’s business.
• Arm did not show any negative impact on its business until just before the trial, at which point the judge did not allow the company to join the case. According to Arm, there was no damage until shipping began. Shipments refer to Hanoa-based Snapdragon SoC for PCs and Pakala-based Snapdragon mobile SoC for next-generation Android smartphones.
• Nuvia ALA appears to have conflicting provisions and special requirements, which ultimately led to a lawsuit with Qualcomm. If Nuvia ALA had been more clear in its common terms and conditions, the likelihood of many disputes arising would have been greatly reduced.

Relations between the two companies have soured, and Qualcomm may have to consider using a different architecture before the ALA expires in 2033. Even if Arm were to offer a new license, the terms would likely not be very favorable given the recent history between the two companies. Arm’s management goals. Note that Qualcomm has a license to use the latest Armv9 architecture.

Analyst insights

Up until now, I have tried not to include my own analysis or opinions in my reports on the trial, but there are a few points I would like to point out.

• I’m not a lawyer, but I was a little surprised that the validity of the “right to approve acquisition terms” was not questioned or deemed unenforceable. This provision can affect the valuation and operation of companies, especially start-ups, and does not add any value to the companies themselves. According to testimony, certain provisions, of which this appears to be one, were granted to Arm at a reduced license fee. However, Nuvia paid what appeared to be the full license fee, according to testimony.
• Another point that was missing from the testimony, or that I missed, was that the microarchitecture is not hard-coded into the ISA and vice versa. It is possible to switch from supporting one ISA to another, although microarchitectural (silicon design) optimization may be required, and there are several examples in the industry.

final thoughts

As an engineer, I understand the difficulty of this case. It’s not just a matter of terms and conditions; it’s fundamentally tied to the technology and chip design involved. In this case, the lawyer is leveraging technical expertise to litigate a case and trying to convey that technical knowledge to a group of people who likely have little or no technical knowledge. As a result, both parties relied on analogies, with Arm leveraging the piano analogy and Qualcomm leveraging the building analogy. Neither was completely accurate or effective, but the analogy is open to interpretation.

As I have argued, the outcome of this case will depend on how the jury interprets the contract and the information presented, and that is impossible to predict. But regardless of how the scales of justice tip in this case, it is likely to impact future technology licensing agreements, potentially impacting the broader Arm ecosystem overall, and ALA licensees in particular, with Arm. May raise competition concerns. It also has the potential to accelerate the development of alternative ISA ecosystems such as RISC-V, which are already starting to gain traction.