Computer Chipmakers Call a Truce, Set Terms

Dan Whalen is a JD candidate at Osgoode Hall Law School.

Calling an end to hostilities, rival chipmakers Intel and NVIDIA have signed a new patent cross-licensing agreement that will take the companies into 2017. The deal grants Intel access to all of NVIDIA’s graphics processing unit (GPU) patents, premier along stand-alone graphics chips. In exchange, NVIDIA will receive access to some of Intel’s patent portfolio in addition to a whopping $1.5 billion spread over six years. That figure is the largest payment in NVIDIA’s history, triple that of its royalties earned from Sony since 2004. The previous, hotly contested  agreement between Intel and NVIDIA was set to expire in March of this year.

Changes to the agreement include Intel’s ability to integrate NVIDIA’s graphics technology directly into its microprocessors, like its upcoming Sandy Bridge central processing unit (CPU), rather than merely connecting its proprietary CPUs to NVIDIA’s stand-alone GPUs. For its part, NVIDIA gains the general right to make microprocessors themselves, such as its recently announced “Project Denver” that it plans to release into the high-performance computing market in a few years.

Absent from the exchange are some specific Intel designs, perhaps most notably the exclusion of its cutting edge x86 microprocessor. NVIDIA maintains, however, that it has no desire to license the technology because it intends Project Denver to be the microprocessor “platform of the future.” Nevertheless, some analysts believe that NVIDIA needs access to such technology if it wishes to remain competitive as the demand for stand-alone graphics processors fades in favour of integrated processors that Intel will now manufacture using NVIDIA technology.

In the agreement, each chipmaker further agrees to drop all outstanding litigation against the other, which had taken on a nasty tone. In March of last year, Intel filed a lawsuit against NVIDIA that declared the companies’ 2004 chipset licence agreement not to extend to some of Intel’s future-generation CPUs. NVIDIA claimed that Intel had manufactured the allegation as part of a “calculated strategy to eliminate NVIDIA as a competitive threat” and counter-sued to terminate Intel’s license on its patents.

Given this history, it remains to be seen if the companies can maintain their agreement or, at least, civility. The accord certainly calms their rivalry but does not eliminate their competition with one another. It is not yet clear who will emerge as the chief beneficiary of the deal.

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