Under the agreement, Intel will pay Transmeta $150 million initially and $20 million in each of the next five years. In exchange, Intel will be granted a right to license Transmeta patents for use in future products. It will also end pending patent litigation between both companies and release all claims between them.
Transmeta, based in Santa Clara, California, sued Intel in the U.S. District Court for the District of Delaware in October last year, claiming some Intel processors violated 10 Transmeta patents covering processor design and power-efficiency techniques. Nine patents covered basic processor functions like scheduling and addressing instructions on a chip, and the tenth related to Transmeta's LongRun technology, used to adjust a processor's voltage based on its workload.
In January, Intel countersued Transmeta for infringing seven patents, also alleging Transmeta withheld and mischaracterized information about other patents and technologies in its patent applications.
Under the agreement, Intel will be in a binding agreement not to sue Transmeta for the development and licensing of LongRun technology to third parties, Transmeta said in a statement.
Transmeta, founded in 1995, tried to break Intel's dominance in the notebook PC market with its Crusoe processor, which allowed PCs to run longer by reducing power consumption. Consumers responded poorly to the processor, leading to Transmeta changing its business model to licensing its technology.
The settlement pumped life into Transmeta's stock (TMTA), which rose 253.11 percent to $14.76 on the Nasdaq stock exchange Wednesday after the announcement. The company faced delisting in March when its stock price dropped to under $1.
Transmeta reported a net loss of $11.5 million and revenue of $171,000 for the most recent quarter ending June 30. Earlier this year, Intel's rival Advanced Micro Devices Inc. invested $7.5 million in the cash-strapped Transmeta.
Intel's settlement agreement will realize immediate financial value for Transmeta's intellectual-property rights and will support the company's technology development and licensing business, said Les Crudele, the president and CEO of Transmeta in a statement.
Intel could not be reached for comment.