Intel Corp. and Nvidia Corp. on Monday announced that they entered into a new comprehensive long-term patent cross license agreement. 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 January 18, 2011.

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 x86 processor architecture, flash memory and certain chipsets for the Intel platform. The two companies also have agreed to drop all outstanding legal disputes between them.

"This agreement signals a new era for Nvidia. 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," said Jen-Hsun Huang, chief executive officer and co-founder of Nvidia.

There are not a lot of companies who receive money from Intel. The fact that the world largest maker of microprocessors agreed to license Nvidia's highly-parallel compute and graphics technologies indicate that the company does consider GPGPU and massively-parallel architectures an important part of the future. Meanwhile, it is also clear that Intel does not want third-party chipsets for its microprocessors and has no plans to license x86 technology to other companies.

This $1.5 billion 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.

"This agreement ends the legal dispute between the companies, preserves patent peace and provides protections that allow for continued freedom in product design. It also enables the companies to focus their efforts on innovation and the development of new, innovative products," said Doug Melamed, Intel senior vice president and general counsel.

Tags: Intel, Nvidia, Business