Smartphone chip supplier Qualcomm has been ordered to pay back $814.9 million to BlackBerry as part of a binding interim arbitration settlement.

The dispute focused on the payment of royalties by BlackBerry to Qualcomm, between 2010 and 2015, for the use of Qualcomm parts/patents in its smartphones. In particular, the arbitrator was asked to decide on whether an agreement to cap certain royalties applied to BlackBerry's non-refundable prepayments of royalties to Qualcomm.

The Californian arbitrator ruled that the cap did apply to the prepayments of royalties and, in effect, that BlackBerry had overpaid Qualcomm. Without doubt, the result was a "big win" for BlackBerry that has been sweetened by a 15 percent jump in its share price (to its highest since January 2016).

Qualcomm's take on the result was that "the arbitration decision was limited to prepayment provisions unique to BlackBerry’s licence agreement with Qualcomm and has no impact on agreements with any other licensee.”

Whilst the exact structure of the royalty payments is unclear, it will be interesting to see whether this result will encourage companies with licensing arrangements with Qualcomm to challenge royalty payments and fees being charged. On a broader view, the result could embolden the appetite for litigation of licensees that feel existing payment caps are being incorrectly applied.

Additionally, the dispute is a timely reminder as to the importance of carefully drafting any caps on payments to be made when entering into a licence or similar commercial arrangement. Parties should carefully consider the intention of such caps, and the scenarios when such caps should or should not apply. Licensors must ensure that caps are drafted precisely, without ambiguity, to avoid the scenario Qualcomm found itself in.