Nvidia Escalates Patent-Licensing Battle With Intel

Nvidia has delayed the development of chipsets that work with Intel's microprocessors, citing "unfair business tactics" employed by Intel, the company said on Thursday.

Nvidia's move also intensifies an ongoing patent-licensing battle in which both companies have accused each other of breaching a chip-licensing agreement signed in 2004. Nvidia currently makes chipsets -- a set of integrated circuits -- for Intel and Advanced Micro Devices CPUs, to help processors communicate with components like network and storage controllers.

In a lawsuit filed in February, Intel asked a judge to declare that Nvidia was not licensed to produce chipsets that cover Intel's new Nehalem-based DMI (direct media interface) bus, which connects the CPU to the system's memory. Nvidia earlier this year countersued, saying the agreement covered the bus, which allows the company to make chipsets for new Intel processors.

"Because of Intel's improper claims to customers and the market that we aren't licensed to the new DMI bus and its unfair business tactics, it is effectively impossible for us to market chipsets for future CPUs," an Nvidia spokesman said in a statement.

Nvidia is postponing further chipset investments until it resolves the legal issues with Intel, the Nvidia spokesman said.

There are certain disagreements between Intel and Nvidia on the chip licensing, which is why Intel had to go to court to resolve the matter, said Chuck Mulloy, an Intel spokesman. Nvidia's decision could simply be related to its business, he said.

Postponing investments in the development of chipsets for Intel's processors could make financial sense for Nvidia because of the uncertainty surrounding the case, said Dean McCarron, principal analyst at Mercury Research.

Stopping the investment is a good option for Nvidia in case the licensing issue doesn't get resolved, McCarron said. The decision could put the company's chipset business in a "cash cow" mode, with steady income and no research-and-development expenditure. The R&D money could be redeployed in other areas like graphics, which is where Nvidia is strong. It would yield a short-term financial benefit for the company, McCarron said.

But it is normal for companies to exchange lawsuits when there is a major change in chip technology, McCarron said. Intel and Via were involved in a much-publicized lawsuit earlier in the decade that got dropped the day it was supposed to go to trial, McCarron said. Such chipset suits end up getting settled a few months or years after the new buses are launched, he said.

Chipsets are playing a smaller role as CPUs integrate more components from the chipsets, McCarron said. Intel, for example, plans to introduce server and laptop chips that integrate major chipset components, including the integrated graphics controller and I/O hub, inside the CPU.

Intel made a major architectural change with Nehalem, in which it integrated the memory controller inside the CPU and got rid of the front-side bus. The front-side bus in earlier Intel chips connected the CPU to the memory controller, which resided on a separate component.

Nvidia will continue to produce chipsets for Intel's older processors that rely on the front-side bus. "We will continue to innovate integrated solutions for Intel's FSB architecture. We firmly believe that this market has a long, healthy life ahead," an Nvidia spokesman said.