Intel Sues Rival Over Microprocessor : Technology: Suit charges that Chips & Technologies’ computer-on-a-chip mimics the functions of Intel’s 386 model. The smaller firm denies infringement.

Continuing an aggressive legal strategy aimed at fending off competition in key markets, Intel Corp. has filed a patent infringement suit against Chips & Technologies of San Jose, which has begun marketing a microprocessor, or computer-on-a-chip, that mimics the functions of Intel’s 386 chip.

Texas Instruments on Monday confirmed that it had agreed to make 386 chips based on the Chips & Technologies design, and said that it would go ahead despite the lawsuit. Chips & Technologies designs computer chips but doesn’t have its own production facilities.

Santa Clara-based Intel filed the suit Friday, less than a week after an arbitrator ruled that Advanced Micro Devices could continue selling a “clone” version of the 386 because Intel had breached a technology sharing deal with AMD.

Unlike the AMD chip, however, the Chips & Technologies 386 is not a clone but rather uses a unique design to perform the same functions as the Intel chip. Chips said that it took great pains to avoid infringing on Intel patents and even had two intellectual property law firms oversee the development of the product.

Still, many observers had expected Intel to sue Chips eventually. And AMD’s success in winning as much as 30% of the 386 market may have made Intel even more eager to block another competitor.

In the suit, Intel seeks an injunction against further infringement and a restraining order to prevent Chips from transferring its 386 technology to another company, such as Texas Instruments or other firms that might make the part for Chips.

In a separate suit, Intel also claims that Chips infringed on a patent for the 387, a math processor chip.

Chips Chairman and Chief Executive Gordon Campbell, who once worked at Intel and has had previous legal run-ins with the chip-making giant, said Monday that he is “surprised, to say the least” that Intel had filed suit.

Cambell said the two companies had been in negotiations over a collection of intellectual property issues, including the 386 and some Chips patents that the company says are used by Intel. He said he believed that the two companies had an agreement not to sue one another while discussions were under way.

An Intel spokeswoman confirmed that the two companies had been discussing a settlement.

Chips is counting on the 386 products, which outperform the Intel chips by many measures,to spur a turnaround. Chips grew rapidly by selling all the chips and circuitry neededto build industry-standard personal computers except for the microprocessor itself. Butthe company has been hurt by fierce competition and the industry wide slump.