UPDATE 1-Nvidia wins round in patent dispute with Rambus

* Nvidia says wins backing of US Patent Office vs Rambus

* Nvidia to submit Patent Office recommendation to ITC

* ITC ruling expected in January

* Rambus shrs drop 3.9 pct after hours; Nvidia shrs rise (Adds Rambus comment, paragraph six)

By David Lawsky

SAN FRANCISCO, Nov 24 (Reuters) - Graphics chip maker Nvidia Corp (NVDA.O) said on Tuesday the U.S. Patent Office has found that 17 patent claims asserted by chip designer Rambus Inc (RMBS.O) are invalid, one step in a dispute over whether Nvidia infringed Rambus technology.

Nvidia, which requested the review, will offer the findings to an International Trade Commission judge in Washington, D.C., which is weighing the validity of the Rambus claims against Nvidia.

The ITC judge, who is not bound by the Patent Office finding, is expected to make a decision in January that will serve as a recommendation to the full ITC. The ITC could bar imports from Nvidia's overseas suppliers if it finds the imports to violate Rambus patents.

"This continues our string of victories against Rambus patents" in the U.S. Patent Office, David Shannon, NVIDIA executive vice president and general counsel, said in a statement.

"We believe these patents are invalid and are confident that a similar decision will be made on the patents that continue to be examined," he said.

A spokeswoman for Rambus said, "The patents remain valid and enforceable as originally issued until the reexamination proceedings are concluded, including all appeals."

The 17 claims arise out of three patents. Eight other claims arising from two other patents at issue in the ITC case are still being considered by the Patent Office.

Rambus, which has spent $300 million on legal disputes with chip makers since 2000, wants Nvidia to pay royalties on memory controller circuits used in Nvidia graphics chips.

In June 2008 Rambus filed suit in federal court in San Francisco charging that Nvidia had infringed 17 patents.

Nvidia said that two of those claims were dropped quickly and six are older patents that expire in early 2010.

The other nine patents formed the basis of the action that Rambus brought before the ITC.

Rambus has since dropped claims on four of them, Nvidia said.

The ITC administrative process is quicker than the federal court and could influence the judge in San Francisco, Susan Illston. Illston suspended proceedings to await the ITC ruling.

Separately in Brussels, European regulators are set to accept a proposal by Rambus to cut royalties to settle antitrust charges, sources have told Reuters. That decision is expected early next month. (Additional reporting by Foo Yun Chee in Brussels and Ian Sherr in San Francisco; Editing by Steve Orlofsky) ((E-mail david.lawsky@thomsonreuters.com; Phone +1 415 677 2505; Reuters Messaging david.lawsky.reuters.com@reuters.net))