Nvidia Hits Back at Intel; Winners Tough to Find

Arthur Cole

Where to begin about Nvidia countersuing Intel over the Nehelem licensing issue? Is it a simple question of who is right and who is wrong? Or is there a larger lesson to be learned, perhaps one about strategy and long- (and not so long-)term thinking?


If you're not already up on the details, here's where we are so far: Last month Intel sued Nvidia to stop the company from creating Nehelem-compatible chipsets, saying it would violate its patents governing the memory and graphics interface technology on the new chips. Nvidia argues that its 4-year-old licensing agreement with Intel gives it access to any microarchitecture the company develops, with no exceptions for those with integrated graphics and memory -- so the Nehelems are fair game. Now, Nvidia is counter-suing Intel, so it can proceed building GPU-based chipsets that could function equally well as general-purpose processors and eat into Intel's dominance of the x86 market.


Lawsuits are always bad news when it comes to getting on with business, but I'm going to explain why I think this is especially bad for everyone involved by taking each group in order: First Nvidia, then Inteland, and finally the rest of us.


This is a bad move for Nvidia because there is already a legal action to determine whether it can proceed with the new chips or not, so another suit is only going to gum up the process even more and delay even further its entry into the market. If the judge in Intel's suit rules against Nvidia, it can always appeal to a higher court. After all, we're still only on the state level here.


What's even more troubling about Nvidia's action is that it seeks to terminate Intel's license to its entire graphics portfolio, including some of the advanced GPU and 3D technologies that Intel uses to supplement its own meager offerings in that area. In poker, that's called raising the stakes, but Intel has been playing poker a lot longer than Nvidia, which recently had one of its cards turned over when Standard & Poor's downgraded it to junk-level BB.


Nvidia President and CEO Jen-Hsun Huang gave a terse statement on the company's Web site last night, sounding rather defensive (and misusing a preposition):

"NVIDIA did not initiate this legal dispute. But we must defend ourselves and the rights we negotiated for when we provided Intel access to our valuable patents. Intel's actions are intended to block us from making use of the very license rights that they agreed to provide."

For Intel's part, this is bad because it also has what could be a significant legal battle with AMD brewing again. Earlier this month, it told AMD that its Global Foundries fab services venture is not a typical subsidiary and is therefore not entitled to any Intel patents that AMD currently licenses. The two companies have a cross-licensing deal in place that has proved to be a major factor in ending the perpetual lawsuits that dragged them down in the 1990s. If that deal breaks down, much of the peace that allowed Intel to thrive and AMD to falter could be gone.


The only statement from Intel that I could find was this one given by spokesman Chuck Mullow to InformationWeek's Antone Gonsalves (who must have had a late night considering the news didn't break until after close-of-business).

"Intel went to court once it became clear that the two sides could not reach an agreement. You can only go so long saying, 'we're licensed, no you're not.'"

For the rest of use, the biggest problem will be the future compatibility of any Intel-based machines with Nvidia graphics. If the dispute persists to the point where their bundled technologies have trouble working together, those machines may have to enter the refresh cycle sooner than expected. This would hurt both companies because it would make the already lower-cost AMD processors with integrated ATI technology even more desirable.



And probably the worst thing about all this is the timing. Economic conditions are bad right now, but there is a lot of hope that we could spin out of this within a year or two. The question for both Intel and Nvidia is whether they want to hit the upswing focused on markets and technology, or legal briefs.



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