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Arm to Appeal Court Ruling Upholding Qualcomm’s Victory in Licensing Dispute

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Arm announced on Tuesday that it will appeal a U.S. federal court decision that upheld Qualcomm’s jury victory in a long-running dispute over processor licensing rights, marking the latest escalation in a case with major implications for the semiconductor industry.

The dispute centers on central processor units (CPUs) designed by Qualcomm’s subsidiary Nuvia, which Arm claimed were produced using its technology without proper authorization. In 2023, a Delaware federal jury ruled that Qualcomm’s CPUs were properly licensed under an existing agreement with Arm, handing a key win to the U.S. chipmaker.

The jury sided with Qualcomm on two of three counts, while deadlocking on the third, leading Judge Maryellen Noreika to declare a mistrial on that issue. Arm later sought to have the favorable verdicts for Qualcomm overturned or to secure a new trial, but the judge rejected both requests.

“Arm remains confident in its position in its ongoing dispute with Qualcomm and will immediately file an appeal seeking to overturn the judgment,” the British chip designer said in a statement.

Qualcomm welcomed the decision, framing it as a validation of its innovation rights.

“Our right to innovate prevailed in this case, and we hope Arm will return to fair and competitive practices in dealing with the Arm ecosystem,” said Ann Chaplin, Qualcomm’s general counsel.

The ruling underscores tensions between Arm’s new licensing model and major semiconductor firms that depend on its architecture. Arm provides fundamental chip technology used in processors made by Qualcomm, Apple, and MediaTek, which power billions of smartphones and connected devices worldwide.

The appeal sets the stage for a closely watched legal battle that could influence how chipmakers access and use Arm’s core intellectual property in future CPU designs.

European Securities Regulator Warns Crypto Firms Against Misleading Customers on Regulation

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Europe’s securities regulator, the European Securities and Markets Authority (ESMA), issued a warning on Friday to crypto companies about misleading customers regarding the regulatory status of their products. The caution comes as European authorities intensify efforts to curb risks associated with crypto assets.

Under the EU’s new crypto regulation framework, known as MiCA, a series of investor protections are in place, including rules on safeguarding client assets and managing complaints. However, ESMA highlighted concerns over crypto asset service providers (CASPs) offering both regulated and unregulated products on the same platform, which poses risks to investors who may not clearly understand which products fall under MiCA’s protections.

ESMA pointed out that some CASPs might exploit their regulated status as a marketing tool, potentially confusing customers about which services are regulated. The regulator stressed that firms must not use their MiCA licensing as a promotional device or suggest that all crypto offerings are covered by the EU’s rules when they are not.

Products outside MiCA’s regulatory scope include direct investments in commodities like gold and crypto lending services.

The move follows global regulatory concerns about crypto investor risks, especially after the collapse of major crypto platforms such as FTX in 2022, which resulted in significant investor losses.

MiCA requires companies offering crypto services to obtain a license from national regulators, enabling them to operate across the EU. ESMA also issued guidance on the knowledge and competence standards that staff should meet to properly assess crypto companies.

ESMA’s warning coincides with the release of a peer review on Malta’s licensing process for crypto firms. The review found that while Malta’s Financial Services Authority has sufficient expertise and resources, its authorization procedures only “partially” met expected standards. Malta defended its role as an early adopter of digital asset regulation but did not directly respond to ESMA’s critique.

Concerns have been raised behind closed doors about the rapid pace at which some EU member states grant crypto licenses, according to previous Reuters reports.

Qualcomm Shares Fall on Downbeat Forecast for Licensing Business

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Qualcomm’s (QCOM.O) shares dropped by around 5% in early trading on Thursday following a disappointing forecast for its patent licensing business, despite strong expectations for quarterly sales and profits. The chipmaker revealed that its licensing business, which contributed 14.8% to its total revenue in the reported quarter, would experience no sales growth this year due to the expiration of its agreement with Huawei Technologies (HWT.UL).

TD Cowen analysts had initially expected the removal of Huawei’s royalty payments to have a mild impact, but they noted that the development adds to the “wall of worry” surrounding Qualcomm’s stock. However, analysts pointed out that Qualcomm has secured licensing agreements with two other Chinese smartphone manufacturers, which may help mitigate some of the losses.

The company’s first-quarter performance exceeded expectations, driven by strong demand for AI features in mobile devices, and is often seen as a barometer for broader smartphone industry trends. Qualcomm’s second-quarter sales forecast of $10.75 billion, with adjusted profits of $2.80 per share, surpassed analysts’ estimates of $10.34 billion and $2.69 per share, respectively, as reported by LSEG data.

While Qualcomm credited growth in its smartphone division to strong sales from China, powered by government subsidies and flagship smartphone launches, it also highlighted positive performance across other business segments, including handsets, autos, and IoT.

Despite gains in 2024, Qualcomm’s stock has underperformed AI chip leader Nvidia (NVDA.O), whose shares surged by 171%. Qualcomm’s stock has increased by 6% this year, far surpassing the losses seen by competitors like Intel (INTC.O), which saw a 60% decline, and Advanced Micro Devices (AMD.O), which dropped by 18%.

As a result of the company’s outlook, Qualcomm’s median price target decreased slightly to $192, down from $199 prior to the report, according to LSEG data. The company’s forward price-to-earnings ratio stands at 15.02, significantly lower than Nvidia’s 27.64 and Intel’s 32.21.