UPDATE 2-Nvidia countersues Intel in licensing battle

* Nvidia seeks termination of Intel's right to its patents

* Nvidia says Intel trying to undermine licensing rights (Adds details from lawsuit, Intel comments)

By Alexei Oreskovic

SAN FRANCISCO, March 26 (Reuters) - Graphics chipmaker Nvidia Corp (NVDA.O) countersued Intel Corp (INTC.O) for breach of contract on Thursday, alleging that Intel made misleading statements designed to undermine Nvidia's licensing rights.

The suit seeks to terminate Intel's license to Nvidia's patents related to graphics processing and three-dimensional computing and comes in response to a related suit by Intel last month.

Nvidia believes that without a licensing agreement, Intel's line of integrated graphics chips violate Nvidia's patent portfolio, according to Nvidia spokesman Hector Marinez.

The complaint represents the latest salvo in an escalating feud between the two chipmakers that has moved from the marketplace to the courtroom.

Intel asked a Delaware court in February to rule that its new generation of microprocessors, such as the Nehalem chip, are not covered under a 2004 cross-licensing agreement between the two companies. That would prevent Nvidia from selling its chipsets that function alongside Intel's new microprocessors.

Intel is the world's No. 1 maker of PC microprocessors, with a more than 80 percent market share, according to IDC.