"This agreement ... preserves patent peace and provides protections that allow for continued freedom in product design," Doug Melamed, Intel's senior vice president and general counsel, said in a statement.
"It also enables the companies to focus their efforts on innovation and the development of new, innovative products."
Under the agreement, both companies get licenses to each other's patents. Nvidia, which makes chipsets to help CPUs communicate with components like network and storage controllers, had accused Intel of unfair business tactics in the long-standing patent-licensing battle with Intel.
Both companies had accused each other of breaching a chip-licensing agreement signed in 2004. Intel filed a lawsuit against Nvidia in Chancery Court in Delaware in February 2009, asking the judge to rule that Nvidia is not licensed to produce chipsets compatible with Intel processors with integrated memory-controller functionality, such as Intel's Nehalem microprocessors.
The long-term licensing agreement announced on Monday ends that litigation, Intel said. After Intel's February 2009 lawsuit, Nvidia filed a countersuit, saying the past agreements covered the direct media interface bus for Intel's CPUs. Intel will begin making payments to Nvidia this month, with $300,000 due next week. Annual payments will continue through January 2016, according to the agreement.