Nvidia countersues Intel in licensing battle

A man demonstrates a computer game in a display area of Nvidia Corp. during the second day of the annual 2007 Computex Taipei June 6, 2007.

SAN FRANCISCO (Reuters) - Graphics chipmaker Nvidia Corp countersued Intel Corp for breach of contract on Thursday, alleging that Intel made misleading statements designed to undermine Nvidia's licensing rights.

The suit seeks to terminate Intel's license to Nvidia's patents related to graphics processing and three-dimensional computing and comes in response to a related suit by Intel last month.

Nvidia believes that without a licensing agreement, Intel's line of integrated graphics chips violate Nvidia's patent portfolio, according to Nvidia spokesman Hector Marinez.

The complaint represents the latest salvo in an escalating feud between the two chipmakers that has moved from the marketplace to the courtroom.

Intel asked a Delaware court in February to rule that its new generation of microprocessors, such as the Nehalem chip, are not covered under a 2004 cross-licensing agreement between the two companies. That would prevent Nvidia from selling its chipsets that function alongside Intel's new microprocessors.

Intel is the world's No. 1 maker of PC microprocessors, with a more than 80 percent market share, according to IDC.

In its countersuit, Nvidia said that Intel has "manufactured" the licensing dispute as part of a "calculated strategy to eliminate Nvidia as a competitive threat," and says it is fully licensed to continue making products that interact with Intel microprocessors.

The disagreement stems from the fact that Intel's new generation of Nehalem microprocessors feature an integrated memory controller. According to Intel, the 2004 licensing agreement only covers its previous generation of products, in which the memory controller was separate from the microprocessor.

"There is a substantial disagreement between Intel and Nvidia about their licensing rights under the agreement," said Intel spokesman Chuck Mulloy.

"We've been trying multiple times, multiple ways to find a way to settle the argument," Mulloy said. The suit simply asks the court to interpret the agreement, he said.

In its counterclaim, filed on Thursday, Nvidia said Intel has attempted to steer customers away from Nvidia products for months by claiming there was a licensing dispute. By officially disavowing the licensing pact through its lawsuit, Intel has breached the contract, Nvidia said.

"Having breached the contract and irreparably injured Nvidia, Intel has lost the right to continue to enjoy the considerable benefit of its license to Nvidia's patent portfolio."

(Reporting by Alexei Oreskovic; editing by Richard Chang and Carol Bishopric)