This is perhaps one of the more interesting afternoon stories. Arm is suing Qualcomm over Nuvia IP misappropriation and trademark infringement. The basic claim is that Qualcomm does not have a license to develop Nuvia IP after Qualcomm purchased the company for $1.4B. Let me break this down as simply as I can for folks on what is going on.
Quick Background
For those that do not know, I actually have a JD from Loyola Law. When I was 21 years old I was just finishing my MBA and I thought I wanted to be a criminal defense attorney like Johnnie Cochran, Robert Shapiro, Gloria Allred, Mark Geragos, and the folks on TV from that era so I started at Loyola Law in Los Angeles where they all went. It took all of about six weeks of criminal law classes to realize that was not my calling. I ended up graduating but never practicing since after working at a large firm on mostly a very large search engine’s litigation between 1L and 2L, I worked at a big management consulting firm between 2L and 3L. After school, I ended up joining PwC’s management consulting practice. Since I had a JD (again, I never wanted to practice) I found myself working on M&A and divestiture deals specifically working on contracts among other projects often related to technology company legal departments.
While I have never practiced, I spent many years doing the diligence and work that a Qualcomm and Nuvia deal would require with large technology companies in my management consulting role. With that, I have a certain view of what Arm is alleging that may be different from others. This is not legal advice, just my own thoughts.
Also, I am typing this quickly just after the news broke, so please excuse typos. Rushing this one out much faster than our normal pieces.
Arm Sues Qualcomm over Nuvia IP Misappropriation and Trademark Infringement
Let us be clear, this is a complaint. Arm has to set out the reasons it believes it is wronged by other parties (e.g. Qualcomm and Nuvia.) It also needs to provide a basis for those claims, the types of remedies it is seeking, satisfying jurisdiction and venue, and how it would like the claims to be addressed by the court.
Let me break down a bit more on what Arm is alleging in its complaint. All citations herein will be to Case 1:22-cv-01146-UNA Document 1 Filed 08/31/22.
The first part is understanding arm Technology License Agreements (TLAs) or Architecture License Agreements (ALAs):
17. There are two main types of Arm licenses for Arm’s technologies:
Technology License Agreements (“TLAs”), which allow the use of specific “off-the-shelf” Arm processor core designs with only minor modifications, and Architecture License Agreements (“ALAs”), which allow for the design of custom processor cores that are based on particular architectures provided by Arm.
18. Arm grants few ALAs. Custom processor cores can take years to design, at great expense and requiring significant support from Arm, with no certainty of success. If successful, ALA licensees can sell custom processor cores for use in other companies’
products.
19. Arm ALAs typically authorize licensees only to develop processor cores based on specific Arm technology provided by Arm under the licenses, rather than granting broader licenses to use Arm-based technology generally.
Here is the basic premise that Arm is working from. It is saying that while Qualcomm and Nuvia both have ALAs, allowing them to make significant modifications to core architectures, it only provides those licenses and support for those licenses in certain use cases. In the complaint, Arm is basically saying that its licenses tie IP to the company that developed the IP. In this case, Nuvia had an ALA and developed cores based on what Arm provided in that ALA plus Nuvia’s engineering efforts. Nuvia selling data center chips under Nuvia would have been fine under its ALA it seems from the complaint. The wrinkle comes that Nuvia was purchased by Qualcomm.
Qualcomm has not responded yet, but frankly, to get to this point it would be shocking if they did not know it was coming. From Arm’s version of events in the complaint:
37. Soon after the announcement of the merger, Arm informed Qualcomm in writing that Nuvia could not assign its licenses and that Qualcomm could not use Nuvia’s in-process designs developed under the Nuvia ALA without Arm’s consent. For more than a year, Arm negotiated with Qualcomm, through Qualcomm Inc. and Qualcomm Technologies, Inc., in an effort to reach an agreement regarding Qualcomm’s unauthorized acquisition of Nuvia’s “in-process technologies” and license.
This is strongly worded. Reading behind this, Arm basically told Qualcomm that a change-in-control of Nuvia required Arm’s agreement per the ALA. This is common in the industry. Qualcomm decided whatever Arm was asking for to get this agreement was not warranted.
Why is Qualcomm in this Position?
Qualcomm has not responded. My best guess on what they will lean on is:
- Qualcomm has its own ALA and agreements with Arm
- Qualcomm had products like Qualcomm Centriq 2400 (I actually saw a demo of this running before the project was halted) in the data center that Nuvia was targeting
- Qualcomm develops products in other lines as well
- It may claim that Nuvia’s architectural IP is separate from the Arm ALA
- Qualcomm should therefore be able to use its Nuvia acquired IP under the terms of its existing Arm ALAs across product segments
The issue will likely come down to a really interesting argument. Arm seems to be posturing that it provides an ALA licensee with IP and support but that it is doing so with the express knowledge that it is only for that licensee’s use in the licensee’s products. If it is used by another company’s products without Arm’s consent, then it falls outside of the agreement. Qualcomm using Nuvia’s cores without Arm’s consent is thus outside of the ALA.
To give an example, what if Apple decided to give Patrick Co. its M2 cores so I could start a company and make server chips derived from those M2 cores and perhaps my modifications without paying for an Arm ALA. I could then sell my Apple M2-derived server cores to others without paying for an Arm ALA. I would also be competing against Arm Neoverse cores, using Arm’s IP, without holding an ALA. Most would understand why this is an issue.
The wrinkle to the above scenario is that Qualcomm has its own ALA(s). So Qualcomm will likely have to argue that its existing ALAs cover its use of Nuvia’s IP, despite the license grantor’s (Arm’s) claims otherwise.
If Qualcomm’s Arm ALA covers IP it acquires from other companies, then its stance makes sense. Both Arm and Qualcomm are sophisticated multi-billion dollar IP companies. They know how to read contracts. I cannot imagine Qualcomm’s diligence team would not look at the Nuvia ALA as well as its own before spending $1.4B on Nuvia. Perhaps it thought Arm would acquiesce and allow the transfer as part of Qualcomm’s ALA, and that did not happen.
The reason this is a fascinating case is because of what it means for the industry. Arm licenses its IP, and therefore wants to control who has access to it, and where they compete with Arm. That makes a lot of sense.
The license itself is valuable. By limiting who has the license Arm is able to generate value from the IP. If the license was broadly available for free, then Arm’s IP would be near worthless.
Arm is arguing that the IP Nuvia generated stemmed from that ALA, and therefore is not transferrable without Arm’s consent. That makes sense on many levels.
What will probably be interesting to folks is that Arm is saying that the IP developed by Nuvia cannot be transferred, per the Nuvia ALA, without Arm’s consent. If that is the actual text in the change-in-control provision, then Qualcomm will likely either need text in its ALA stating it can acquire Arm ALA licensee IP and integrate it under its own ALA, or convince a jury that it should be covered in this way even if it is not written in such a manner.
Arm Sues Qualcomm over Trademark and False Designation of Origin
Arm has two other claims but these are frankly less interesting. One is saying that due to the lack of proper license post-Nuvia license termination, calling them “ARM” CPUs or technology is not permitted. Arm also contends that this would be a false designation of origin.
Those two are not the main show in this, but Qualcomm will have to respond to them.
Final Words
Personally, I can see the case for both sides. We do not have the actual ALA contract language in this complaint for both licenses. It is fairly extreme to see Arm sue Qualcomm. Normally this is the type of issue that gets negotiated out of court.
Perhaps the biggest immediate impact is on Ampere. Ampere is developing its next-gen custom core for server CPUs using an Arm ALA. If Arm is successful in its suit against Qualcomm and Nuvia, then Ampere’s prospect of being purchased by another ALA holder may not diminish, but the cost of Arm’s consent to transfer the ALA needs to be baked into the valuation of Ampere.
Also, if Arm wins, and Qualcomm must destroy IP from Nuvia, then it would likely need some mechanism to ensure that Nuvia IP did not “magically” reappear in future Qualcomm products. Since, in theory, Qualcomm is a competitor to Arm using its ALA, then that is not a simple process either.
If Arm loses, then selling ALAs will be an exceedingly risky business. The cost would need to skyrocket as it would no longer have the ability to control the competition using Arm’s own IP to compete against Arm.
Time will tell on this one, but there is one surefire winner in all of this: the attorneys. This is going to be a massive lawsuit.
Can anyone say RISC-V… even Microsoft, whom I imagine Qualcomm is courting for Windows on Arm (with Nuvia designs in consumer hardware), is not going to be too happy, and enough UEFI crap has appeared for RISC-V that Windows on RISC-V is definitely a possibility, and certainly running in some development lab in Redmond, WA.
Arm is doing what they have to do, but for everyone else with custom silicon aspirations, RISC-V is the only future.
What is the upshot for the consumer in this? Is there an unbalanced harm or benefit to the consumer from one or the other party winning?
Also, consider a world where arm was an American company. Would the false designation of origin injury be rendered moot in that case if it doesn’t cross borders? Or is the “origin” arm’s patent portfolio here?
Interesting case, even for this layman.
Wouldn’t ARM need specific provisions in the Qualcomm ALA that they can’t just purchase the IP from other ALA holders and paste that IP into the Qualcomm ALA. I totally get that ARM would be savvy enough to make sure startups likely trying to sell their IP eventually would need ALA provisions to force new ALAs at a minimum during the transfer. But highly doubt that ALA had any language to force new money out of existing ALA holders if they were the buyers. And also highly doubt the Qualcomm ALA has any language suggesting they need new ALA related payments if they buy a design rathe than produce it in house. So I really think Qualcomm lawyers aren’t saying anything much cause they see this as a pretty obvious open and shut case and don’t want to confuse anything by speaking outside of court on the matter other than to say they own all the IP and have and ALA. And they have stated as much to Bloomberg.
Basically I am contesting this tidbit in your write-up. “Qualcomm will likely either need text in its ALA stating it can acquire Arm ALA licensee IP and integrate it under its own ALA, or convince a jury that it should be covered in this way even if it is not written in such a manner.”
ARM to me should have HAD to get explicit language into the Qualcomm ALA from the get go that Qualcomm cannot by 3rd party IP ARM ALA designs and use them with this Qualcomm ALA. I think ARM is the one with the big job here in that ALA doesn’t normally have any language basically making it seem the ALA designs IP are not the property of the designer. If they did no VC would give any ARM ALA devs money to go spend developing ARM compatible products as such language would effectively mean they don’t have firm ownership of the IP they create. I can totally get a buyer loses the ALA….but ARM needed to put language in ALA to say the ALA holder cannot buy 3rd party ALA designs and use them with standing ALAs. It really seems this is all just cause ARM is butthurt they are losing a huge TLA customer to CiC and don’t have sufficient CiC provisions in the ALA’s for the Qualcomm/Nuvia transaction to deserve a penny from Qualcomm over it and Qualcomm has refused to give much money at all based on their reading of the ALAs. But this was the ONLY way to recover some of the TLA revenue losses they have coming. Hopefully the court will interpret in this fashion rather than trying to have Qualcomm prove something of their ALA that likely has no bans on buying other ARM IP and using their own ALA to produce and market it.
Also, ARM has no risk from handing out ALAs at reasonable prices….it just forces their design houses and TLA business to be on top of it’s game in the segments they decide to target. Part of the problem for Qualcomm with using TLAs is the Apple ALA designs are superior to the TLA options. ARM is generally screwing a viable return TLA customer really if Nuvia team doesn’t continue to deliver or ARM themselves can get back ahead of Apple and this Nuvia team. After this Qualcomm will never pay for a TLA again I suspect unless ARM wins. Even then, Qualcomm could have Nuvia team port their IP concept to RISC-V ISA. Wouldn’t really be so simple but to me there is just a really unwise move going on here with ARM and how they had been running their model upto now. Qualcomm abandoned domestic ALA derived designs as Apple got ahead as ARM TLA designs were closer. To now basically tell Qualcomm they can’t purchase another ALA design or have some huge ALA cost not ever defined anywhere in CiC to try and get back in the game with Apple will leave a super sour taste in Qualcomms mouth as far as doing business with ARM TLA or ALA.
If someone creates a custom Micro-Architectural design that can be made to take ARM’s assembly language OP Codes and break them down into that custom designer’s chosen micro-ops to be executed by the designer’s custom execution engines and on that designer’s in-house custom IP , then where is the line drawn that says what part of that is ARM Holdings IP and what part of that is the custom Micro-architecture designer’s IP.
Modern Microprocessors have Decoders and their own Micro-op execution engines/etc and it’s relatively easy to have that custom Micro-architectural execution engine reprogrammed to execute another ISA using some other execution rules that are relevant to a different ISA.
Remember AMD’s Zen-1 and Now Mothballed Custom ARM core K12 Project(Not the Opteron 1100) where Jim Keller was managing 2 Teams with one Team Being The Zen-x86 core Team and the Other that K12 custom ARM Core team. And there are YouTube Videos with Jim Keller and Mark Papermaster and Jim Keller stating that AMD’s Zen-1 cores and Custom K12 cores where sharing a lot of design elements like cache subsystems and other elements that are similar to All Modified Harvard Architecture based CPU cores in use today from many designers. So what parts of AMD’s Custom ARM K12 Project is ARM Holdings IP and what parts of that is AMD’s IP and that’s the sort of line that will have to be defined and established by that Court and have a bearing on any case law going forward there if that lawsuit goes through to completion.
As an observer, I think it’s pretty obvious that ARM would have provisions in its ALA that any license transfer would require ARM’s consent.
While Qualcomm can buy Nuvia, the ALA and derived IP is another matter.
That Qualcomm have their own ALA is irrelevant.
@Neko, this issue is that Qualcomm ALREADY has an ALA and as @ISATempler put so well Nuvia’s design and IP are mostly unique to Nuvia and very little to do with the ARM ISA. So unless Qualcomms ALA disallows using some 3rd party designs on the Qualcomm ALA that is still active, something is rotten. ARM isn’t saying anywhere at all that they are trying to kill Qualcomm’s ALA or even that there is some limitations beyond the norm in the Qualcomm ALA that disallow where/how they get/come up with a design to use in it.