iPhone maker Apple and American microchip manufacturer Qualcomm said Tuesday they have agreed to "dismiss all litigation" against each other in a sprawling battle over royalty payments.
The deal includes a six-year license agreement with the option to extend for two years, and a payment to Qualcomm from Apple, the companies said.
The two tech industry heavyweights were due to begin opening arguments in a federal courtroom on Tuesday in San Diego, California. With the settlement, Qualcomm avoids what had promised to be a high-stakes battle that could have resulted in billions in payments to Apple.
Apple accused the company of abusing its market-dominant position to charge exorbitant amounts for its chips or access to its patents.
Qualcomm, which earns a significant chunk of its revenue from royalties it charges for its patented technology, denied the allegation and in turn accused Apple of abusing its position and using the courts as a tool to push prices down.
Word of the deal sent Qualcomm's shares soaring on Wall Street, with the company's stock up 21.1 percent around 1940 GMT.
Apple's shares were up slightly as well but in line with the broader market, adding 0.2 percent.