Transmeta Corp., a struggling Santa Clara, Calif., chipmaker, emerged with a transformative licensing deal Wednesday, as Intel Corp. agreed to pay it $250 million to settle a patent infringement suit Transmeta filed against the Silicon Valley titan last year.

Under the agreement announced Wednesday, Intel will pay $150 million up front with annual payments of $20 million for each of the next five years. In return, Intel gets a perpetual nonexclusive license to all of Transmeta’s patents and patent applications.