Monday, March 16, 2009

Intel, AMD Exchange Words Over Cross-License Breach

Intel Corporation has reportedly put AMD on notice that they believe AMD has breached a 2001 patent cross-license agreement with the company. According to the disclosure notification posted today on the Intel site Intel believes that AMD's recent spin off it's chip manufacturing process, which led to the creation of the new company GlobalFoundries violated the terms of the cross-license agreement.

Intel Corporation today disclosed that the company has notified Advanced Micro Devices (AMD) that it believes AMD has breached a 2001 patent cross-license agreement with Intel. Intel believes that Global Foundries is not a subsidiary under terms of the agreement and is therefore not licensed under the 2001 patent cross-license agreement. Intel also said the structure of the deal between AMD and ATIC breaches a confidential portion of that agreement. Intel 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.

"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."

Under terms of the license agreement the notification to AMD means the parties will attempt to resolve the dispute through mediation. In response to the notification AMD claimed Intel breached the agreement by notifying AMD of its breach. Intel believes that position is inconsistent with the dispute resolution process outlined in the original agreement.

AMD has refuted these claims claiming that GlobalFoundies is a subsidiary of the parent company and is in complete compliance with the original agreement. AMD has backed its position by filing with the SEC, claiming that it did not violate the original terms, and that if Intel did terminate, it would be the one breaching the original contract.

"AMD remains in full compliance with the cross-license agreement. And as we’ve stated all along, the structure of GLOBALFOUNDRIES takes into account all our cross-license agreements. We will continue to respect Intel’s intellectual property rights, just as we expect them to respect ours," commented AMD's Michael Silverman in a Tom's Hardware interview.

AMD's filing with the SEC, on March 11th:

The Company [AMD] strongly believes that (i) the Company has not breached the terms of the Cross-License and (ii) Intel has no right to terminate the Company's rights and licenses under the Cross License. Under the terms of the Cross License, there is an escalating procedure for resolving disputes, and the Company has commenced the application of that procedure with respect to Intel's purported attempt to terminate the Company's rights and licenses under the Cross License. In addition, the Company has informed Intel that the Company maintains that Intel's 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 which gives the Company the right to terminate Intel's and licenses under the Cross License Agreement while retaining the Company's rights and licenses under the Cross License Agreement.

When asked about the termination of the agreement an Intel spokesman Chuck Mulloy told Tom's Hardware, "We've given [AMD] 60 days to fix the issue or AMD's rights under the agreement are terminated. Not the agreement [itself]. Subtle but important differences." Mulloy continues stating that "the next step is mediation as outlined in the 2001 agreement. We hope to find a way to resolve this matter."

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