Intel warns AMD of patent breach

Chip maker Intel on Monday sent a notice to rival Advanced Micro Devices that it violated a patent cross-licensing agreement when it spun off a manufacturing arm into a separate company.

Intel licensed AMD the rights to make and sell x86 chips under a 2001 patent cross-licensing agreement, said Chuck Mulloy, an Intel spokesman. AMD transferred the right to make x86 chips to its manufacturing spin-off GlobalFoundries, which Intel alleges violates terms of the original agreement.

Intel considers GlobalFoundries a separate company and not a manufacturing subsidiary of AMD. Though AMD has the right to make x86 chips, transferring those rights to a separate company was not part of the patent cross-licensing agreement with Intel, Intel said.

AMD last October announced it would focus on chip design and move its manufacturing operations to a separate company. AMD early in March closed a deal with investment firm Advanced Technology Investment Company to spin off manufacturing operations to GlobalFoundries. AMD received US$700 million from ATIC as part of deal, while getting a 34.2 share of GlobalFoundries. The rest of GlobalFoundries is owned by ATIC.

Breach of the agreement terms could result in the loss of licenses and rights Intel has granted to AMD, the company said. Both companies earlier tried to settle the dispute through negotiations but didn’t reach an agreement. By sending the notice, Intel enters the next phase of talks with AMD under a mediator in an attempt to settle the dispute, Mulloy said.

Intel has asked AMD to make public portions of the agreement between AMD and ATIC, which is owned by the Abu Dhabi government.

In a filing with the SEC, AMD said it has not breached the terms of the cross-licensing agreement and that Intel had no right to terminate the company’s rights and licenses. AMD has commenced the procedure to respond to “Intel’s purported attempt to terminate the rights and licenses,” the company said in the filing.

The notice represents an ugly escalation in the battle between the rival chip makers over the years. AMD has continuously accused Intel of anticompetitive behavior in the x86 microprocessor market by allegedly offering rebates and selling chips below cost to PC makers and retail stores. AMD helped initiate a European Commission investigation in Intel’s business practices in 2000.

The notice is the latest ploy by Intel to divert attention from the antitrust suits it faces worldwide, AMD claimed.

“Intel’s action is an attempt to distract the world from the global antitrust scrutiny it faces. Should this matter proceed to litigation, we will prove not only that Intel is wrong, but also that Intel fabricated this claim to interfere with our commercial relationships and thus has violated the cross-license,” AMD said in a prepared statement.

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