Intel will pay Nvidia $1.5bn in licensing fees in return for the use of technology made by the graphical chip specialist and a halt of legal proceedings between the two companies.
The cross-licensing agreement, announced on Monday night, gives Intel access to Nvidia's full range of patents and Nvidia access to some of Intel's patents, but excluding access to x86 technology and certain other products. The agreement also sees the two companies drop all legal disputes between them. The agreement runs for six years, from 10 January, 2011 to 31 March, 2017.
"This agreement ends the legal dispute between the companies, preserves patent peace and provides protections that allow for continued freedom in product design," Intel general counsel Doug Melamed said in a statement. "It also enables the companies to focus their efforts on innovation and the development of new, innovative products."
Intel will pay Nvidia $1.5bn (£963m) in six instalments over a five-year period. Payments start on 18 January, 2011 and the final payment will be made on 15 January, 2016, according to the patent cross-licence agreement.
"Our cross licence with Intel reflects the substantial value of our visual and parallel computing technologies," Jen-Hsun Huang, Nvidia's chief executive, said in a statement. "This agreement signals a new era for Nvidia."
Intel may want access to Nvidia's patents to boost its nascent efforts in graphical processors, Matthew Wilkins, a principal analyst at iSuppli, told ZDNet UK on Tuesday.
"The reality is that Nvidia is primarily a graphics company, so they've made a lot of strategic acquisitions over the years ... so they've got a pretty significant graphics portfolio," Wilkins said. "When you design a high-performance graphics chip, sooner or later you're going to come into an area that's patented or owned by another company."
Nvidia and Intel are starting to compete with each other in their core markets, with Intel developing a new architecture that combines a CPU with an on-die GPU and Nvidia tying-up with ARM for the development of a chip targeted at the desktop, server and high-performance computing tiers.
On 5 January at the Consumer Electronics Show (CES) in Las Vegas, Intel launched its Sandy Bridge processors, which boast a fully-integrated on-die graphical processing unit (GPU) along with multiple CPU cores.
"If we look at what Intel has been doing in the last couple of years [it's] been putting more investment in [its] graphics technology, and that's certainly manifested with Sandy Bridge," Wilkins said.
Also on 5 January, Nvidia announced that it will develop a chip, code-named Project Denver, targeted at high-performance computing, servers and desktop computers.
"Clearly those are key areas for Intel... absolutely the companies are going to compete at the level," Wilkins said.
Wilkins noted that access to some of Intel's patents could help Nvidia, because "a big part of Nvidia's business is GPUs for desktops, servers, and to do that you need to have a certain level of knowledge about how Intel chipsets work and communicate".
The agreement has been filed with the US Securities and Exchange Commission and is now public, with the exception of one agreement term that is confidential. The agreement is available in PDF format.