Investors sent Transmeta shares up 15 percent, or $0.17, to $1.29 per share in Thursday trading, after the chip maker filed a patent infringement lawsuit against Intel. The suit contends Intel used Transmeta’s technologies in several lines of microprocessors.

The lawsuit, filed Wednesday in U.S. District Court in Delaware, claims that Intel used 10 of Transmeta’s power management and other patents in designing its chips, including Pentium 4, Pentium M, and the latest product line, Core 2.

Transmeta, based in Santa Clara, California, filed the suit 17 months after it announced plans to shift its focus from making chips to licensing technologies, particularly for controlling a chip’s power consumption, to other chip companies (see Transmeta Re-Invents Itself). It discontinued making the older Crusoe line of chips but said it would continue to sell its Efficeon processors.

By relying on licensing fees and royalties for its revenue, Transmeta has an even stronger interest in pursuing companies whose designs it believes have infringed on Transmeta’s intellectual property. Yet revenues from the first half of this year didn’t come from licensing fees.

“It’s a reflection of where they are,” said Eric Ross, an analyst at ThinkEquity Partners. “It will be an expensive fight for Transmeta.”

Intel spokesman Chuck Mulloy said the company will carry out a “vigorous defense” against Transmeta’s claims.

The 11-year-old company made a splash in 2000 when it came out of stealth mode to announce it had developed designs that would make it a serious challenger to Intel, the world’s largest computer chip maker. Transmeta was founded by David Ditzel, a chip industry veteran who led the development of SPARC chips at Sun Microsystems.

In 2000, Tansmeta raised $273 million through an IPO. But the company never became a significant player. Intel came out with its own low-power laptop processor, the Pentium M. The chip was sold under the brand Centrino, and became a huge seller. Intel has since put the design into its desktop and server processors as well.

Transmeta needs to get aggressive if it wants to pursue a licensing strategy. For the first half of this year, the company posted revenues of $28.84 million, which came from selling products and services but not from collecting licensing fees. In comparison, the $31.56 million the company generated for the first half of 2005 included $10 million from licensing agreements.

The company did improve its bottom line. Transmeta posted a net loss of $10.11 million for the first six months of 2006, compared with a net loss of $14.25 million a year ago. It also has about $52 million in cash.

Although Transmeta is suing Intel, it isn’t likely to do the same against Intel rival Advanced Micro Devices. Last June, AMD said it would market Transmeta’s Efficeon chips for PCs aimed at developing countries.

Transmeta’s case against Intel is likely to go to trial in 2008. Transmeta is asking the court to stop Intel from selling chips that used Transmeta’s designs and order Intel to pay for unspecified damages.

Contact the writer: UWang@RedHerring.com