(Reuters) -Chip company Arm is canceling an architecture licensing deal that allows Qualcomm (NASDAQ to use its intellectual property to design chips, a person familiar with the matter said, amid an ongoing legal battle between the two companies.
Qualcomm shares fell nearly 3% on Wednesday, while Arm lost about 6%.
Arm has given Qualcomm a mandatory 60-day notice about canceling a license that allows Qualcomm to design its own chips based on Arm's computing architecture, said the person, who requested anonymity.
Bloomberg News was first to report the development.
UK-based Arm, majority owned by Japanese group SoftBank (TYO ), sued Qualcomm in 2022 for failing to negotiate a new license after acquiring Nuvia.
Arm had previously said that the design Qualcomm was planning for Microsoft's (NASDAQ ) Copilot+ laptops was a direct technical descendant of the Nuvia chip and had canceled the license for these chips.
“This is more of the same from ARM: more baseless threats designed to squeeze a long-standing partner, interfere with our performance-leading CPUs, and increase royalty rates regardless of the broad rights under our architectural license,” a Qualcomm spokesperson said in an email. statement.
“With a trial quickly approaching in December, Arm's desperate ploy appears to be an attempt to disrupt the legal process, and its termination claim is completely baseless. We are confident that Qualcomm's rights under its agreement with Arm will be asserted. This conduct will not be tolerated.”
The legal battle between the two tech giants is scheduled to begin in federal court in Delaware in December.
A victory for Arm in the litigation could force Qualcomm and its roughly 20 partners, including Microsoft, to halt shipments of the new laptops. It would also essentially undo one of Qualcomm's biggest strategic acquisitions in recent years.
Despite the public feud between the two companies that depend on each other for revenue and profits, some investors and analysts believe they will reach a settlement well before the trial.
“If the 60-day cancellation warning were applied, Qualcomm could, in theory, be severely limited in terms of what it could sell, given the importance of ARM architectures for its chipsets, and ARM would lose a portion of revenue for royalties,” said Russ Mold, chief investment officer at AJ Bell.
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