February 19, 2009

A private squabble between Intel Corp. and Nvidia Corp. has moved to the courtroom, casting a new light on competition in a product category called chip sets.

The battle hinges on patent-licensing agreements signed in 2004 between the two chip makers, which are both based in Santa Clara, Calif. Intel, the dominant supplier of chips that act as the brains of personal computers, also sells most chip sets that connect Intel microprocessors to the rest of a system. Nvidia, which is best known for graphics chips, used the agreements to enter the chip-set market, too.

Intel filed a suit in Delaware Chancery Court Monday, seeking a judgment that the agreements -- which allow Nvidia chips to connect to existing Intel microprocessors -- don't extend to newer models that add a feature called a memory controller. That feature is a key selling point of a microprocessor family called Nehalem that Intel began offering in November.

Nvidia disputes that interpretation of the agreement, and accuses Intel of trying to limit competition. "The way they would like to go forward is to lock everybody out of anything associated with the Intel platform," said Jen-Hsun Huang, Nvidia's chief executive, in an interview.

Mr. Huang said Nvidia hadn't planned to introduce a chip set for Nehalem for a year and a half, asserting the only reason to sue now is to squeeze the smaller company with legal fees. "They are trying to slow us down," he said.

Chuck Mulloy, an Intel spokesman, said "that is not what we are doing." He argued that Nvidia has been violating the agreement by asserting it has a license to make Nehalem chip sets, and said the suit came only after the companies debated the issue in private for more than a year.

Competition has dwindled in chip sets for Intel microprocessors, as several suppliers have reduced their focus on the market. Nvidia has provided a counterpoint, including a chip set called Ion for Intel's Atom processor that displaced Intel chip sets in computers from Apple Inc.