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AMD says the split into two companies doesn't interfere with the agreement

AMD and Intel are rivals in the marketplace when it comes to x86 compatible CPUs and graphics processors. AMD and Intel have a cross-license agreement in place that allow AMD to use Intel IP to build x86 compatible processors.

On October 7, AMD announced that it was splitting its holdings into two separate companies. AMD will continue as a designer of CPUs and GPUs. The other company is called The Foundry and will be responsible for manufacturing chips for AMD and other companies.

The new company starts with AMD's chip fabs and the chipmaker will retain a 44.4% stake in The Foundry. The remaining 55.6% of The Foundry will be owned by a pair of Abu Dhabi companies that together invested $5.7 billion.

BetaNews reports that Intel issued a statement saying that it will be investigating whether or not the split of AMD and AMD's resulting minority stake in The Foundry violates the heavily redacted licensing agreement that allows AMD to design and manufacture x86 compatible CPUs.

The issue in the eyes of Intel is that the original licensing agreement granted AMD a non-exclusive, non-transferable license for x86 technology. Intel feels that with AMD splitting in two and now only owning a minority stake in The Foundry where Intel's IP will be used will not give AMD the control over the IP as stipulated by the agreement.

Intel's Chuck Malloy told BetaNews, "We have an obligation to our shareholders that we protect our intellectual property. We want to make sure their interests have been taken into consideration."

AMD for its part believes that it is not in violation of licensing agreements in place between it and Intel. AMD's Michael Silverman told BetaNews, "We are completely confident the structure of this transaction takes into account our cross-license agreements. Rest assured, we plan to continue respecting Intel's intellectual property rights, just as we expect them to respect ours."

According to eWeek, Hans Mosesmann, a financial analyst with Raymond James, believes that Intel could use the split of AMD and transfer of its IP to The Foundry to pressure AMD to drop long-standing lawsuits it has against Intel.

Mosesmann wrote, "AMD, in our view, is likely violating the Intel x86 cross-license, but we suspect Intel may look the other way as it benefits Intel to have an AMD that will over time have increasing variable costs (good for ASPs). Intel may choose to entice AMD to drop the anti-trust suits against Intel in return for this altruistic gesture.”

It appears that Intel is pressuring AMD to release a non-redacted version of the licensing agreement to the public, at this point only the heavily redacted version is available. AMD maintains that releasing a non-redacted version of the license agreement is not going to happen.

AMD spokesman Phil Hughes said, "It’s a business document and we are not going to negotiate this in the press or the media. This is something that the lawyers have to work out.”

That statement and Intel's willingness to release the full version of the licensing agreement could certainly make it seem AMD knows that it is violating the license agreement it has in place with Intel in some minds.

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By Parker75 on 10/9/2008 12:02:02 PM , Rating: 5
I don't think that the cross-licensing agreement is transferable to another company, even if that company was spun from AMD. However, I also think that the new company would not be in violation of any IP infringement if it were to manufacture x86 compatible chips based on AMD design. I think the issue may be that Intel may have also cross-licensed some manufacturing processes with AMD and they do not want the new company to utilize those techniques.

Of course this is all a speculation because no one but the two parties involve know exactly what was cross-licensed and the limitation on the transfer of those licenses.

RE: Speculation..
By Proteusza on 10/9/2008 12:46:50 PM , Rating: 5
Besides, Intel didnt kick up a fuss when Chartered manufactured Athlon64s a few years ago.

RE: Speculation..
By ThePooBurner on 10/9/2008 6:52:51 PM , Rating: 3
I think that will be the key that keeps AMD from being at fault or in violation. Even if tey are Intel set a precident by not caring about Chartered, and as such have waived their right to care about The Foundry also making chips.

RE: Speculation..
By TA152H on 10/12/2008 11:36:38 PM , Rating: 2
There is a perfectly good reason why Intel did not. It was not a violation of the agreement.

AMD is allowed to make up to 20% of their processors in FABS that are not their own. Chartered never went over that, therefore, AMD was in compliance.

By the way, VIA/Centaur also make x86 chips, and they compete pretty well in the low power arena. I'm unclear how they are doing this. Although, the courts never did decide in Intel's favor that AMD could not use the x86 instruction set without Intel's permission, by the way. The licensing agreement was created to settle the case. I remember one thing Intel insisted on that bit them - that AMD's future processors were not to be made on a platform that Intel created. The K7 and beyond have enjoyed a much better platform.

Be careful what you ask for ...

RE: Speculation..
By deeznuts on 10/9/2008 4:46:38 PM , Rating: 2
if you believe that the license is non-transferrable, why would you then believe the new company would not be in violation of IP infringement if it manufactures it based on AMD's design?

First, we don't know what's in the licensing agreement. They can be open, or retrictive. The license may say, AMD, and only AMD, is licensed to design and manufacture CPUs based on X86. That precludes anyone else, not licensed separately from Intel, from fabbing x86 cpus.

And AMD spinning off, then selling more than 50% of the company is a change in control. I have experience in that area for sure. That would require consents to assignments with pre-existing contracts, or new ones, both required if the original contracts don't allow for assignments.

“Then they pop up and say ‘Hello, surprise! Give us your money or we will shut you down!' Screw them. Seriously, screw them. You can quote me on that.” -- Newegg Chief Legal Officer Lee Cheng referencing patent trolls
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