(Reuters) -Arm Holdings is cancelling an architectural license agreement that allows Qualcomm to use intellectual property to design chips, Bloomberg News reported on Tuesday, amid an ongoing legal battle between the two companies.
Qualcomm's shares fell over 5% in premarket trading, while Arm's U.S.-listed shares were down around 2%.
Arm has given Qualcomm a mandated 60-day notice of the cancellation of the licensing agreement, the report said, adding that the contract allows Qualcomm to create its own chips based on standards owned by Arm.
UK-based Arm, which is majority-owned by Japan's SoftBank Group, sued Qualcomm in 2022 for failing to negotiate a new license after it acquired Nuvia.
Arm had previously said the current design planned for Microsoft's Copilot+ laptops is a direct technical descendant of Nuvia's chip and it had cancelled the license for these chips.
"This is more of the same from ARM – more unfounded threats designed to strongarm a longtime partner, interfere with our performance-leading CPUs, and increase royalty rates regardless of the broad rights under our architecture license," a Qualcomm spokesperson said in an emailed statement.
"With a trial fast approaching in December, Arm's desperate ploy appears to be an attempt to disrupt the legal process, and its claim for termination is completely baseless. We are confident that Qualcomm's rights under its agreement with Arm will be affirmed. Arm's anticompetitive conduct will not be tolerated."
Arm declined to comment on the report.
The legal battle between the two tech giants is scheduled to begin in the federal court in Delaware in December.
An Arm victory in the litigation could force Qualcomm and its roughly 20 partners, including Microsoft, to halt shipments of the new laptops. It would also essentially unwind one of Qualcomm's biggest strategic acquisitions in recent years.
Despite the public fight between the two companies that rely on each other for revenue and profit, some investors and analysts believe they will reach a settlement well ahead of the trial.
(Reporting by Sameer Manekar, Surbhi Misra and Jahnavi Nidumolu in Bengaluru; Editing by Alan Barona and Rashmi Aich)