Toshiba Will Pay TI Royalty on Chip Patents : Technology: Texas Instruments is expected to make similar deals with other Japanese firms. Some analysts say the deals may reap $800 million a year.

In the first of what is expected to be a series of lucrative agreements with Japanese chip companies, Texas Instruments said Tuesday that it had reached a broad patent-licensing deal with Toshiba Corp. that requires Toshiba to pay TI a royalty on all its semiconductor sales.

Terms of the 10-year agreement were not disclosed, but analysts estimated that TI would receive anywhere between $50 million and $150 million annually from Toshiba. If other Japanese chip companies agree to similar terms, TI stands to at least double the $160 million a year in revenue it now gains from patent royalties. Some analysts believe that the Dallas-based firm could eventually gain as much as $800 million a year.

TI holds basic patents on some widely used memory chips and chip-production technologies, and last year the Japanese patent office granted the company a long-pending patent for the invention of the integrated circuit. That patent, known as the Kilby patent, was believed to be an important factor in the agreement with Toshiba.

Over the past several years, TI has sought hefty royalty payments from many chip firms as part of a strategy to turn its patent portfolio into a profit center. TI has cross-licensing arrangements with most big U.S. firms, but it has angered many in the electronics industry by aggressively suing smaller semiconductor and computer companies for patent infringement.

TI first took on the Japanese companies in 1986, when it successfully sued Toshiba, seven other Japanese chip firms (including giants such as NEC, Hitachi, Fujitsu and Mitsubishi), and Samsung of South Korea for infringing its patents on memory chips. In 1987, the nine companies agreed to five-year licensing pacts--retroactive to 1986--which are believed to account for a large chunk of the $650 million TI has reaped in patent income since 1987.

Those agreements, as well as deals with some other memory chip manufacturers, expire at the end of this year, and TI, armed with an additional weapon in the form of the Kilby patent, has been seeking a substantial increase in royalty payments. Toshiba was the first company to come to terms, and TI said the annual payments would “greatly exceed” the amounts paid under the prior agreement.

A Toshiba spokesman in Tokyo said the licensing pact “hurts, but it won’t affect our competitiveness.” He declined to say how much Toshiba will pay.

Andrew J. Kessler, an analyst with Morgan Stanley & Co., estimated that Toshiba will pay royalties of about 2% of its integrated circuit sales, which would total about $80 million on sales of $4 billion. “Some thought it would be a lot higher,” he said, in reference to reports earlier this year that TI was seeking as much as 10% in royalties. “But 2% is a great number, an enormous flow into TI.”

But Richard L. Whittington of Kidder, Peabody & Co., who has long held that TI will reap a huge windfall from its patents, said he believed that the figure was 4% of integrated circuit sales, yielding about $150 million next year and more in subsequent years.

Times staff writer Leslie Helm in Tokyo contributed to this story.