Intel says GlobalFoundries deal breaches AMD cross-licensing agreement
Intel Corporation has sent notice to its chief competitor Advanced Micro Devices that it believes AMD has breached a patent cross-licensing agreement that the two reached in 2001. The agreement covered royalty payments by AMD in regards to aspects of the x86 instruction set used in CPUs, as well as foundry and production rights.
AMD recently spun off its fabs in a multi-billion dollar deal involving Advanced Technology Investment Company (ATIC) and Mubadala Development, both solely owned by the Emirate of Abu Dhabi. The deal funnelled badly needed cash and debt relief into AMD, which has been struggling for several years to compete against Intel's CPUs. It also led to the creation of GlobalFoundries, an integrated circuit foundry which will compete against the likes of TSMC and Chartered Semiconductor for business. AMD would continue to be GlobalFoundries' primary customer.
However, Intel believes that GlobalFoundries is not a subsidiary under the terms of the agreement, and is therefore not licensed to produce CPUs that use key technologies licensed under the 2001 patent cross-license agreement.
Intel also said that the structure of the deal between AMD and ATIC breaches a confidential portion of that agreement, and it has asked AMD to make the relevant portion of the agreement public, but so far AMD has declined to do so. AMD's breach could result in the loss of licenses and rights granted to AMD by Intel under the agreement.
If GlobalFoundries is not recognized as a subsidary of AMD, it will have to negotiate with Intel to secure patents that would allow it to continue to produce AMD's CPUs at its fabs in Dresden. Intel has the option of securing a court injunction to halt production until the dispute is settled. Negotiation of a patent licensing agreement could take months, if not years.
"Intellectual property is a cornerstone of Intel's technology leadership and for more than 30 years, the company has believed in the strategic importance of licensing intellectual property in exchange for fair value. However AMD cannot unilaterally extend Intel's licensing rights to a third party without Intel's consent," said Bruce Sewell, Senior Vice President and General Counsel for Intel.
"We have attempted to address our concerns with AMD without success since October. We are willing to find a resolution but at the same time we have an obligation to our stockholders to protect the billions of dollars we've invested in intellectual property".
In a filling with the Securities and Exchange Commission, AMD stated Intel "purports to terminate the Company's rights and licenses under the Cross License in 60 days if the alleged breach has not been corrected".
Intel claims that in response to the material breach notification it sent out, AMD claimed Intel breached the agreement by notifying AMD of its breach.
AMD defended itself, with Harry Wolin, AMD's Senior Vice President and General Counsel, stating that Intel's unilateral "purported attempt to terminate the Company’s rights and licenses under the Cross License itself constitutes a material breach of the Cross License by Intel".
Under the terms of the license agreement, the notification to AMD means the two parties will attempt to resolve the dispute through third party mediation.
a user comment on daily tech:
More from INQ:The truth behind is Intel is trying to make sure no company can gain by reselling its IP. Why does ATIC want to provide tens of billions dollars to AMD just to get those inferior AMD fabs in the first place? It's pretty simple, it wants to access all those IPs that licensed to AMD automatically. AMD is reselling the right to IPs that it doesn't own to gain fast cash. Intel is defending it's own properties and making sure no other will follow AMD. I don't see there is anything wrong with that.
PLEASE SIT DOWN if you are not already, but the long long long telegraphed patent license spat between Intel and AMD over Global Foundries is edging closer to a hot war. Intel sent AMD a letter saying it is breaching the agreement, and AMD is shooting back.
Word of this tiff first leaked out when AMD filed an 8-K form this morning saying that Intel thinks the Global Foundries deal breaches the 2001 patent cross-license agreement between the two companies. It gives AMD 60 days to rectify this breach or its rights under the agreement would be terminated.
This does not mean that Intel's rights would be terminated, however. For that, Intel would need to breach its side of the agreement. That is why AMD sent Intel a 'please get stuffed yourself' letter basically accusing Intel of interfering with AMD's business. This gives Intel 60 days to rectify that problem or its rights get terminated.
According to the agreement, the two sides had to meet, and that was done. The next step is to send letters, which as you can guess, is now done. Mediation follows, and if the two sides don't see eye to eye, then the licenses terminate... sort of.
From there, it will get ugly, and end up with lawyers in court. AMD says that it is in full compliance with the agreement, and Intel obviously disagrees. Given the glacial speed of the courts, this looks to be settled long after the sun dies a heat death somewhere around the year 5 billion.
Ironically, that is after the AMD antitrust trial is set to go forward in early 2010. The next 12 months or so look to be very lucrative for AMD and Intel legal staff, outside counsel, and local pizza joints that deliver late at night.
One interesting side note is what the breaches are. Intel says there are two breaches, one is in the definition of 'subsidiary'. Basically, Intel alleges that AMD does not have enough ownership for Global Foundries to be a real subsidiary, and that means AMD is fabbing too many wafers 'externally'.
That particular issue should be pretty cut and dried, there are legal definitions of such terms. It would shock us greatly if AMD didn't very carefully tap dance around those definitions when it did the Global Foundries deal. We don't see this as going very far, but it makes good headlines.
The second issue is a bit more touchy. The agreement which can be found here has a bunch of things redacted. Intel alleges that AMD is in violation of one of the redacted parts, but neither side can comment on what that bit is, or why AMD is not living up to it. Supposedly. Lets hear it for censorship, three cheers, one, ****, three!
Intel is saying that if AMD says it is in the clear, why not make the document public? On the phone this morning, AMD sort of agreed to do so, provided that Intel makes public the antitrust documents.
When asked about this, Intel didn't seem to mind as long as AMD opened up its side as well. Since there isn't a big company out there that doesn't have snotloads of embarrassing emails stuck on compliance-mandated WORM media, this should be fun to watch.
In the end, we are at step two of a four or five-step process, and that doesn't count appeals, counter-potshots, and general legal manoeuvering. This is unlikely to be settled for years, and will drag on and on and on, with only mild flashes of interest until then.
For now, we have legal posturing, position staking, and general FUDding of the press and markets. With any luck, both sides will agree to open the agreement, and then open the antitrust documents, then things will be fun.
How about it guys? µ