The legal battle centered on nVidia's ability to make "chipsets" that are compatible with Intel's latest processors - a fight that has implications for many of the world's computer users, since Intel and nVidia chips are ubiquitous.
nVidia is a top maker of graphics chips. Intel is the leader in microprocessors, the "brains" of personal computers. Both companies also made chipsets, which are used to help both types of chips talk to each other, among other jobs.
Both sides had a lot at stake. Intel needed the patent deal for access to nVidia's graphics technologies. nVidia needed it because without the ability to talk to Intel's processors, nVidia's chipset business would be essentially dead. Indeed, nVidia announced in October 2009 that it was exiting the chipset business.
Intel will pay nVidia the US$1.5bil in licensing fees over the next five years as part of the deal announced yesterday.
The reason Intel finds itself in the unlikely position of paying nVidia is that Intel gets a licence to nVidia's entire patent library out of the deal, while nVidia gets a licence to some of Intel's patents, but not those covering Intel's primary products - particularly microprocessors and chipsets based on the so-called x86 design.
The settlement comes as the companies are adjusting to their changing roles in the semiconductor industry, as smartphones and Tablets force chipmakers to design smaller and more energy efficient chips, and the explosion of high-definition content online has placed an increased premium on high-quality graphics.
Intel's general counsel, Doug Melamed, said the settlement "preserves patent peace and provides protections that allow for continued freedom in product design."
nVidia's CEO, Jen-Hsun Huang, said the "agreement signals a new era for nVidia" and "reflects the substantial value of our visual and parallel computing technologies."
Parallel computing is the equivalent of multitasking - making computers process different types of data at once, an approach that's critical for rendering graphics.
nVidia's Huang added that the agreement "underscores the importance of our inventions to the future of personal computing, as well as the expanding markets for mobile and cloud computing."
Intel, dominant in PCs, is facing the rise of smartphones and Tablets that use lower-power chip designs than the one Intel uses. nVidia, whose graphics chips have largely been popular with gamers, is trying to boost its profile with mainstream computer users as more people stream high-definition Internet video through their computers, which is taxing for chips that aren't specifically designed for it.
Those pressures have put Intel and nVidia more in competition with each other. Intel has been trying to not only reduce the power consumption of its chips to get into the new types of mobile devices but also to improve its chips graphical performance - with the aim of wooing business from nVidia.
Meanwhile, nVidia has been hammering Intel publicly, arguing that graphics chips that can do general-purpose processing as well are the future. nVidia has also announced plans to build its own general-purpose processors based on the lower-power standard.
Intel also had to pay for another recent settlement with a rival. In 2009 Intel agreed to pay its primary rival in microprocessors, AMD Inc, US$1.25bil (RM4bil) to settle AMD's antitrust allegations. - AP
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