Nvidia countersues Intel for breach of contract

Nvidia Corp. countersued Intel Corp., accusing the rival chip company of breach of contract related to a chip licensing agreement between the two companies.

The countersuit escalates an ongoing patent-licensing battle between the companies, which disagree on the interpretation of memory technology in Intel's chips and its compatibility with Nvidia's chip sets.

In a filing in the Delaware Court of Chancery, Nvidia asked the court to declare that Nvidia is allowed to make chip sets that support Intel's Nehalem and future processors that incorporate the new memory technology.

The lawsuit Thursday comes in response to Intel's suit last month in the same court asking a judge to declare that Nvidia is not licensed to produce chip sets compatible with such chips. Intel said the licensing agreement covers only old chips, while Nvidia said the contract agreement signed between 2004 covered the Nehalem and other future chips.

Intel's Nehalem chips integrate memory controllers inside the chip, which helps the CPU communicate with the memory faster. Nvidia makes chip sets, which are devices that help processors communicate with components like network and storage controllers.

The companies have had discussions for more than a year attempting to resolve the matter, but the talks have been unsuccessful. Both companies are now in court to resolve the dispute.

“Intel's actions are intended to block us from making use of the very license rights that they agreed to provide,” said Jen-Hsun Huang, Nvidia's CEO, in a statement.

Nvidia's filing underscores the substantive disagreement over terms of the license agreement between the companies, Intel spokesman Chuck Mulloy said.

“We have been unable to resolve the differences so we've asked the court to resolve it,” Mulloy said.

As CPUs integrate more capabilities, Intel may be looking to shut out competitors and gain control over its future chip designs, said Nathan Brookwood, an analyst at Insight64. Intel will soon integrate graphics capabilities into laptop and desktop processors, which could affect Nvidia's graphics and chip set businesses.

Nvidia's chip set business is dying and the suit may hurt efforts to hook it up with the profitable graphics card business, Brookwood said. By attacking the chip sets, Intel may be looking to promote its own integrated graphics chips, while shutting out Nvidia's graphics technology from PCs.

“Intel's graphics may not be as good as Nvidia's graphics, but it'll be in the processor and it'll be free. Free is a tough number to beat,” Brookwood said.