Intel agrees to pay NVIDIA $1.5b in patent license fees, signs cross-license

Between slagging each other off with cartoons like the one above and taking each other to court over chipset licenses, there's been no love lost between NVIDIA and Intel over the past few years -- but it looks like the war is over. The two companies just announced a new six-year cross-licensing deal that will see Intel paying NVIDIA a total of $1.5b over the next five years for access to NVIDIA's technology, while also giving NVIDIA a license to some of Intel's patents. The two companies have also agreed to drop all pending litigation, because you know, they're now friends who just exchanged a billion and half dollars. Crucially, Intel won't give up rights to x86, flash memory or "certain chipsets," so we don't really know if this agreement allows NVIDIA to produce integrated graphics for Sandy Bridge -- although most manufacturers are going with an Optimus-style discrete / integrated switchable arrangement that pairs Intel's on-die graphics with a discrete NVIDIA chip anyway, so we're not so sure it actually matters. We would love to see NVIDIA support Intel's Wireless Display 2.0 and the new Insider 1080p movie service, though -- and if these two coming closer together results in better Intel on-board graphics that can rival AMD Fusion, well, things will get very interesting indeed. Oh, the possibilities of peace.

P.S.- And seriously, what a turnaround for NVIDIA at CES: it's gone from being the company that was going nowhere with Tegra to completely dominating the Android landscape with Tegra 2, finding its way into all sorts of cars, and upending the desktop processor space with Project Denver -- all while pocketing $1.5b of Intel's cash. Not bad work for one Mr. Jen-Hsun Huang.

Update: NVIDIA just said on its press call that it has "no intentions to build chipsets for Intel processors," and that Intel will be able to use NVIDIA's technology in Sandy Bridge, so we suppose that answers that question.

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Intel to Pay NVIDIA Technology Licensing Fees of $1.5 Billion

New Six-Year Cross-License Renews Previous Agreement

SANTA CLARA, CA--(Marketwire - January 10, 2011) - NVIDIA announced today that it has signed a new six-year cross-licensing agreement with Intel.

For the future use of NVIDIA's technology, Intel will pay NVIDIA an aggregate of $1.5 billion in licensing fees payable in five annual installments, beginning Jan. 18, 2011.

NVIDIA and Intel have also agreed to drop all outstanding legal disputes between them.

"This agreement signals a new era for NVIDIA," said Jen-Hsun Huang, NVIDIA's president and chief executive officer. "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."

Under the new agreement, Intel will have continued access to NVIDIA's full range of patents. In return, NVIDIA will receive an aggregate of $1.5 billion in licensing fees, to be paid in annual installments, and retain use of Intel's patents, consistent with its existing six-year agreement with Intel. This excludes Intel's proprietary processors, flash memory and certain chipsets for the Intel platform.

The existing agreement is to expire March 31, 2011.

Pursuant to U.S. GAAP, a portion of the proceeds will be accounted for and attributed to the settlement of prior legal claims. This amount, which NVIDIA anticipates to be less than $100 million, will be included in the company's fourth-quarter results.

The balance of the licensing fees will be accounted for on a straight-line basis over the six-year term of the agreement. Accordingly it is anticipated that this would amount annually to approximately $233 million of operating income and an increase in net income of $0.29 per diluted share, on a full year basis.

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Intel Announces New Patent Cross License Agreement with NVIDIA

SANTA CLARA, Calif. – Jan. 10, 2011 – Intel Corporation today announced that it has entered into a new comprehensive long-term patent cross license agreement with NVIDIA. The companies have also resolved pending litigation in Chancery Court in Wilmington, Del., ending all outstanding legal disputes between the companies.

"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. "It also enables the companies to focus their efforts on innovation and the development of new, innovative products."

Under the transaction, 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, including that x86 and certain other products are not licensed to NVIDIA under the agreement. 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. 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 at www.intel.com/pressroom/legal.