Intel Signs Patent Cross Licensing Deal with NVIDIA

Signaling a major shift in the processor and graphics world, semiconductor giant Intel Corp. entered into a new comprehensive long-term patent cross license agreement with graphics GPU supplier NVIDIA. The two entered into this deal after resolving all outstanding legal disputes. According to NVIDIA (News - Alert), it has signed a six-year cross-licensing agreement with Intel (News - Alert).

Under this deal, Intel receives a license to NVIDIA's patents subject to the terms of the agreement. NVIDIA receives a license to Intel's patents subject to the terms of the agreement. However, this excludes Intel’s proprietary x86 architecture, flash memory and certain chipsets. Intel and NVIDIA have also exchanged broad releases for all legal claims, including any claims of breach of their previous license agreement. Intel will pay NVIDIA $1.5 billion over the next 5 years in five annual installments, beginning Jan. 18.

"This agreement ends the legal dispute between the companies, preserves patent peace and provides protections that allow for continued freedom in product design," said Doug Melamed, Intel senior vice president and general counsel, in a statement. "It also enables the companies to focus their efforts on innovation and the development of new, innovative products."

Commenting on this deal, NVIDIA’s president and CEO, Jen-Hsun Huang, said, "This agreement signals a new era for NVIDIA. Our cross license with Intel reflects the substantial value of our visual and parallel computing technologies. It also underscores the importance of our inventions to the future of personal computing, as well as the expanding markets for mobile and cloud computing."

Intel said that this obligation will be recognized as a liability totaling approximately $1.4 billion, on a discounted basis. Intel recognized an expense of $100 million in the fourth-quarter of 2010, classified as "marketing, general and administrative." The remaining amount, approximately $1.3 billion, will be recognized as an intangible asset in the first quarter of 2011 and will be amortized into cost of sales over future periods.

With the exception of one agreement term that is confidential, the agreement will be made available in filings with the Securities and Exchange Commission, and can be viewed, Intel said.