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.