Nvidia gets $1.5 billion from Intel, but not what it wanted

Two months after we broke the news

Nvidia world icon Nvidia gets $1.5 billion from Intel, but not what it wantedABOUT TWO MONTHS ago, we said that Intel and Nvidia had settled their patent suit, and it was going to end up with about $1 billion going to Nvidia. Yesterday it was officially announced with the tab rising to around $1.5 billion.

If you read the suit and counter-suit behind the settlement, it is very clear that Nvidia signed a front side bus license when they thought they were getting a chipset license. These two things are very different. A front side bus is a very distinct technical term that covers the connection from a CPU to the memory controller, something that doesn’t exist in Intel’s Nehalem, most Westmere models, and all CPUs from this point on. Front side busses have now gone the way of the back side bus.

The cases were both pending patent litigation, something that no company wants to deal with. Patent litigation takes years, tend to involve injunctions, lots of CxO time, and usually end up with the majority of the patents in question being invalidated. Since most of the patents this time are likely very tenuous to begin with, this is an eventuality that neither side wanted.

Even if one side succeeds in nuking the majority of the patents from the other side, there is a very high likelihood that lurking in the muck somewhere is one or two legitimate patents that could end up in huge damages and a large percentage of Intel’s or Nvidia’s product line being barred from the market. With Intel integrating GPUs into the CPUs and locking out all third party chipset makers from the market, the stakes were very high.

In the end, neither party is being entirely honest in explaining the settlement. Given the number of dollars going back and forth, Intel is effectively paying Nvidia about $250 million a year to license their patents. Please note that this does not cover the value of the chipset business Nvidia claims to have been cheated out of. In exchange, Nvidia is getting a subset of Intel’s patents, and at that, not the ones they wanted.

What Nvidia wanted was license to the Intel x86 patents, something even Nvidia said is not covered by this agreement. This was confirmed to SemiAccurate by Nvidia insiders, and was an early negotiating point that we are told was not even considered by Intel. Since Nvidia is said to have been willing to drop the entire suit for the right to make x86 parts, it looks like both sides value that at $1.5 billion or so.

In the end, Nvidia got a good chunk of cash, but they didn’t get what they were after. Both sides avoided the bruising legal battle and invalidation of a large chunk of their patent portfolio, so it is a win/win. Given the acrimony and childishness surrounding this suit, look for a reprise in about 5 years if Nvidia still exists as a going concern. This time it ended up just like we said.S|A

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 Nvidia gets $1.5 billion from Intel, but not what it wanted

Charlie Demerjian

Roving engine of chaos and snide remarks at SemiAccurate
Charlie Demerjian is the founder of Stone Arch Networking Services and SemiAccurate.com. SemiAccurate.com is a technology news site; addressing hardware design, software selection, customization, securing and maintenance, with over one million views per month. He is a technologist and analyst specializing in semiconductors, system and network architecture. As head writer of SemiAccurate.com, he regularly advises writers, analysts, and industry executives on technical matters and long lead industry trends. Charlie is also a council member with Gerson Lehman Group.