Can you post the link to the license agreement? A google search of the terms in your post took me to the NVIDIA PhysX SDK/Driver page.
If that is the correct page then what you read is the license agreement for "NVIDIA PhysX" - NVIDIAs implementation of the open PhysX standard. Im sure NVIDIA can license its implementation of PhysX in whatever way it wants. In this case, NVIDIA is the owner for code of NVIDIA PhysX, but the binaries are available for *free*. This does not make PhysX a proprietary standard.
For example, the C language is an open standard (similar to PhysX). Borland makes a compiler/tool for developing in C, calling it Turbo C (similarly NVIDIA PhysX). Borland can license Turbo C with whatever conditions it wants, just like how NVIDIA does with NVIDIA PhysX. This doesnt mean that others cant write C language compilers nor does it make the C language a proprietary standard. People are free to implement their own C compiler and license the *compiler* with whatever terms they choose.
The *PhysX standard* (not the implementation) is open and ATI is free to implement it on their own graphics card. Heck, they can even develop a new graphics card for it. They can call it, for instance, ATI PhysX and release the ATI PhysX SDK/engine with whatever licensing they choose.
The implementation (NVIDIA PhysX) is different from the standard (PhysX) and can have completely different licensing.
If that is the correct page then what you read is the license agreement for "NVIDIA PhysX" - NVIDIAs implementation of the open PhysX standard. Im sure NVIDIA can license its implementation of PhysX in whatever way it wants. In this case, NVIDIA is the owner for code of NVIDIA PhysX, but the binaries are available for *free*. This does not make PhysX a proprietary standard.
For example, the C language is an open standard (similar to PhysX). Borland makes a compiler/tool for developing in C, calling it Turbo C (similarly NVIDIA PhysX). Borland can license Turbo C with whatever conditions it wants, just like how NVIDIA does with NVIDIA PhysX. This doesnt mean that others cant write C language compilers nor does it make the C language a proprietary standard. People are free to implement their own C compiler and license the *compiler* with whatever terms they choose.
The *PhysX standard* (not the implementation) is open and ATI is free to implement it on their own graphics card. Heck, they can even develop a new graphics card for it. They can call it, for instance, ATI PhysX and release the ATI PhysX SDK/engine with whatever licensing they choose.
The implementation (NVIDIA PhysX) is different from the standard (PhysX) and can have completely different licensing.