Apple Inc and Qualcomm Inc on Tuesday decided to drop all ongoing litigations and settle their royalty dispute, reaching an agreement on global patent license and chipset supply.
The settlement also includes a payment from Apple to Qualcomm, whose size the two companies did not disclose.
Shares of Qualcomm jumped 22 percent in late afternoon trading, while Apple stock was up marginally.
The settlement followed two years of legal conflict between the two companies and came as a opening arguments took place at a trial in federal court in San Diego.
Apple had accused Qualcomm of using illegal patent practices to keep a monopoly on modem chips that connect phones to mobile data networks. Qualcomm had said Apple was using its technology without paying for it.
Apple began using Intel modem chips in some iPhones in 2016. Apple later stopped paying licence fees to Qualcomm and completely stopped using its chips in iPhones in 2018.
A jury of six men and three women was in the process of hearing opening arguments from Apple and Qualcomm when news of the settlement broke.
Judge Gonzalo Curiel briefly dismissed the jury as reporters in the courtroom rushed to confirm the news. Apple's litigation chief Noreen Krall chatted privately with Qualcomm attorney Mark Snyder before Judge Curiel called the jurors back into the courtroom.
"The two parties have reached the ideal conclusion," Judge Curiel told the jury before dismissing them. "This development allows these tech companies to get back to business, and it will permit you to get back to your affairs."
Apple filed a $1 billion lawsuit against Qualcomm in January of 2017, accusing the chipmaker of overcharging for chips and refusing to pay some $1 billion in promised rebates.
Later Qualcomm hit back with its own lawsuit, alleging that Apple used its heft in the electronics business to wrongly order contract factories such as Hon Hai Precision Co Ltd's Foxconn to withhold royalty payments from Qualcomm that Apple had historically reimbursed to the factories.
As part of the settlement, Qualcomm will also end litigation with Apple's contract manufacturers.
Apple had alleged that Qualcomm's patent practices were an illegal move to maintain a monopoly on the market for premium modem chips that connect smart phones to wireless data networks.
Apple's iPhones earlier used to sport only Qualcomm's modem chips, which help a device connect to wireless data networks. With the launch of iPhone 7 in 2016, Apple started using Intel modem chips in some models instead.
Qualcomm told investors in July it believed its modem chips were completely removed from the newest generation of iPhones released in September, leaving Intel as the sole supplier.
Teardowns of the new devices have confirmed that Intel is supplying the modem chips.
Shares of Intel, Qualcomm's main competitor for supplying modem chips to Apple, trimmed gains to be up marginally at $56.42.
Intel did not immediately respond to Reuters request for comment.