Intel dominates the personal computer microchip market
US chip maker Intel has agreed to pay rival AMD $1.25bn as part of a deal to settle all outstanding legal disputes between the two companies.
The two firms said the settlement covered all anti-trust litigation and patent disputes.
"While the relationship between the two companies has been difficult in the past, this agreement ends the legal disputes," the two firms said.
AMD's shares closed up 21% following the announcement.
"While it pains me to write a cheque at any time, in this case I think it was a practical settlement," said Intel's chief executive Paul Otellini.
"It was a good compromise between the two companies, and in many ways it was a small multiple of the potential damages that could be awarded in a jury trial."
Under the terms of the deal, the two firms have agreed a five-year cross licensing agreement, with each agreeing to give up claims of breaching previous agreements.
AMD's chief executive, Dirk Meyer, said the deal created a more level playing field and the company was now "one big step closer to achieving our bold vision".
Competition regulators in Asia, Europe and the US have all taken action against Intel because of complaints by AMD.
Europe's competition spokesman, Jonathan Todd, said he had taken note of the settlement, but that it did not change Intel's duty to comply with European competition law.
Intel makes 80% of the microchips that power personal computers.
One of the cases filed in Delaware in the US accused Intel of using its market dominance to get customers to buy from them instead of AMD.
Douglas McIntyre, analyst at 24/7 Wall street, said AMD's case was pretty strong in alleging that Intel "bullied customers using its huge market share". He added that AMD should have got a better price for shareholders.
As a result of the settlement, Intel updated its fourth-quarter financial forecasts. It now expects spending to be about $4.2bn - up from $2.9bn.