Intel-AMD x86 License Dispute Boils Over

Intel and Advanced Micro Devices have escalated a dispute over their x86 cross-license agreement, with each company insisting Monday that it has the right to turn off the other's access to its intellectual property while conducting its own business as usual.

How ugly is it? Intel, AMD alleges, has threatened to terminate the smaller chip maker's rights and licenses under the agreement in 60 days if the conflict over AMD's spin-off of its manufacturing assets isn't resolved. And AMD says Intel's alleged attempt to terminate AMD's license "itself constitutes a breach of the cross-license agreement, which, if uncured, gives AMD the right to terminate Intel's license."

So far, the dispute has not proceeded to litigation and remains a private matter between Intel and AMD, though in recent months neither company has been shy in publicly airing making known allegations committed by the other.

The dispute centers around Sunnyvale, Calif.-based AMD's recently finalized deal to spin off its manufacturing assets to form a new company called Globalfoundries that is majority-owned by Abu Dhabi-based Advanced Technology Investment Co. (ATIC). Years in the making, the move was approved by AMD shareholders in February.

Intel contends that AMD's new arrangement means the smaller company would be extending Intel's x86 licensing rights to a third party without Intel's consent. The Santa Clara, Calif.-based chip giant claimed in a statement Monday that "Global Foundries [sic] is not a subsidiary under terms of the [2001 patent cross-license] agreement."

AMD, in a statement also released Monday, insists that "the structure of Globalfoundries takes into account all our cross-license agreements." The smaller chip maker filed a form 8-K with the U.S. Securities and Exchange Commission Monday, informing the SEC that it had received correspondence from Intel alleging that AMD had "committed a material breach" of the x86 cross-license agreement by creating Globalfoundries and that Intel would terminate AMD's rights and licenses under the agreement in 60 days unless the matter was corrected.

Intel does claim that "AMD's breach could result in the loss of licenses and rights granted to AMD by Intel under the agreement." But Intel legal spokesman Chuck Mulloy would not comment on whether a specific 60-day injunction against AMD was being sought. Mulloy told Channelweb Monday that the steps Intel was taking were merely part of the procedure for dispute resolution established in the agreement itself.

"Through this whole process, first it was 'asset light' then it was 'asset smart,' and then The Foundry Company and now it's called Globalfoundries, through the whole period we have advised AMD privately and stated publicly that we will work to protect our intellectual property rights," he said.

Next: What's A Subsidiary, Anyway?

Mulloy confirmed that AMD "did try to send us a letter saying we're in breach [of the cross-license agreement]." The legal spokesman insisted that a termination of AMD's access to Intel's intellectual property would not have any effect on Intel's own rights and licenses under the agreement so long as Intel remained faithful to the terms--"and we're not in breach," he added.

Intel contends that AMD is in breach of a clause in the agreement that "describes how you set up a subsidiary," Mulloy said. The details of that clause have been kept confidential at AMD's insistence, the spokesman claimed.

What those details are could be the crux of Intel's claim against AMD, said Roger Kay, president and founder of research firm Endpoint Technology Associates.

"One of Intel's two contentions concerns a redacted portion of the agreement. So maybe they have something there, but we can't know," said the analyst. "Intel insists that it's AMD that is keeping the stuff redacted. AMD hasn't said that they won't make that part public, but they do say they can't talk about it."

Kay said that certain known facts about the Globalfoundries deal point to the new company being a true subsidiary of AMD--such as the portion of assets that AMD has contributed to the venture, AMD's retention of profits and the composition of the new company's board. But certain provisions for Globalfoundries to retain veto power over AMD-generated decisions "sound less like a subsidiary arrangement," he said.

At the heart of the whole dispute, of course, is the x86 license itself.

The term "x86" refers to the 8086 microprocessor released by Intel in 1978. That chip's instruction set architecture was carried over to successive generations of Intel products, including the industry-defining 80386 chip in 1986, and is now by far the most commercially successful architecture in the personal computer and server microprocessor markets. Intel generally refers to the x86 instruction set as the "Intel Architecture" and protects its ownership of the architecture fiercely.

AMD, which rose to prominence as a maker of Intel processor clones, signed a contract with Intel in 1982 to become a licensed second-source manufacturer of 8086 and 8088 processors. However, since developing its first in-house x86 processor, the K5 in 1996, AMD has built up its own stable of intellectual property--some of which Intel leverages as part of the 2001 cross-license agreement, the smaller chip maker points out.

Describing the agreement as "a two-way street," Monday's AMD statement calls the benefits Intel gains from access to AMD patents for 64-bit architecture extensions, multicore architecture, the integrated memory controller and the like "critical for [Intel's] product designs under the cross-license."

But AMD, which is currently pursuing antitrust rulings against Intel in various global venues, also alleges that Intel's claims about the x86 agreement are a "diversion" that the chip giant has "manufactured ... to distract attention" from charges that it is a monopoly.