Patent Truce for Transmeta, Intel

It’s a big win for struggling chip design company Transmeta.

Intel has agreed to pay $250 million to settle charges that it pilfered Transmeta’s chip designs into its microprocessor products, including at least Intel’s Pentium III, Pentium 4, Pentium M, Core and Core 2 product lines.

Under terms of the settlement, Intel will make an initial $150 million payment to Transmeta and then pay it an annual license fee of $20 million for each of the next five years.

Transmeta’s stock soared on the news. Shares opened at $4.18 when the deal was announced yesterday, then more than tripled to close at $13.91. However, shares had fallen by close to 5 percent in regular trading today. Shares of Intel, meanwhile, lost 3 percent yesterday and slipped a further 1 percent today, to $25.92.

The deal calls for Transmeta to license its patent portfolio to Intel for use in current and future Intel products. Intel gets a perpetual non-exclusive license to all Transmeta patents and patent applications, including any future patent rights acquired by Transmeta over the next decade.

In addition, Transmeta plans to transfer Intel a non-exclusive license to Transmeta’s LongRun and LongRun2 technologies, plus future improvements.

Transmeta first sued Intel over the patents in 2006, alleging that Intel infringed 10 of its patents covering computer architecture and power efficiency technologies.

Intel later countersued, claiming seven of the patents in the dispute were not “duly and legally issued” because Intel was issued the patents first.

Now that all that’s behind them in the settlement, the money should come in handy for Transmeta, the once-darling start-up that has struggled in recent years.

After bursting onto the technology scene in 2000 with low-power,
x86-compatible processors, the company later fell on hard times following product delays. Its promising Crusoe processor also struggled to compete in the
chip market for mobile systems. In the past three fiscal years, Transmeta lost roughly $136.5 million.

It eventually shifted into licensing in order to keep the cash flowing.
AMD also stepped in with an investment and a deal to buy
Transmeta’s Efficeon processor for desktop computers in emerging markets.

In a statement touting the patent infringement settlement with Intel, Transmeta President and CEO Les Crudele said the deal would create value for Transmeta stockholders, “both by realizing immediate financial value for our intellectual property rights and by supporting our technology development and licensing business going forward.”

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