Intel Corp. (NASDAQ: INTC) stock is dropping today after the company agreed to pay a $250 million settlement to Transmeta Corp (NASDAQ: TMTA) in a patent dispute. The terms include one initial payment of $150M plus annual $20M disbursements. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on INTC.

Intel stock has climbed over the past six months, hitting a one-year high of $26.98 last week. This morning, INTC opened at $26.33. So far today the stock has hit a low of $25.62 and a high of $26.39. As of 11:50, INTC is trading at $25.72, down $1.08 (-4.0%). The chart for INTC looks bullish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bearish hedged play on this stock, I would consider a January bear-call credit spread above the $30 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.3% return in 3 months as long as INTC is below $30 at January expiration. Intel would have to rise by more than 16% before we would start to lose money. Learn more about this type of trade here.

Intel Corp. (NASDAQ: INTC) is in the semi-hot seat with fellow processor manufacturer Transmeta Corp (NASDAQ: TMTA) over the technology used in its newer Core Duo processors as well as the Pentium line of processors that Intel has been known for worldwide for over a decade. Many global PC manufacturers -- like Apple, HP and Dell -- are now using the newer Intel Core Duo chips. Intel will probably, then, settle this out of court, as I doubt it wants an injunction from selling these processors that provide a good bulk of its revenue base.

The Transmeta lawsuit alleges that Intel has violated ten patents covering processor design and power efficiency techniques. The small chip manufacturer and designer is asking the court for damages, royalty payments, and an injunction barring Intel from selling infringing products. The injunction, if granted, would cover almost every heavy-hitter in the Intel product portfolio -- the Pentium III, Pentium 4, Pentium M, Core and Core 2 processors -- basically, every major processor release in the last 10 years.

Of significant note here are the patent violations that have been the hallmark of Intel processors for years; things like basic processor functions (scheduling and addressing instructions on the chip) or voltage adjustment technology that lives inside the processor and changes depending on its workload (great for laptop battery life). My question is this: what took Transmeta so stinking long here? Intel has had these technologies in its chips for years and years.