Ever since AMD announced its plan to split itself into two separate companies, there have been legal questions surrounding the move. AMD's x86 cross-licensing agreement with Intel has always required that Sunnyvale maintain a certain corporate structure in order to continue to manufacture x86-compatible microprocessors. When it unveiled its plans to spin off The Foundry Company (now Globalfoundries), AMD confidently maintained that its plan avoided any licensing entanglements or issues Intel might seek to raise.

AMD has filed a form 8-K with the SEC, advising the agency of a cross-licensing dispute between itself and Intel. In discussions with Ars, however, AMD has also insisted that neither it nor Globalfoundries actually requires the cross-licensing agreement in order to design or manufacture x86-compatible microprocessors. That's a surprising claim that runs against the general understanding of what the AMD/Intel cross-licensing agreement allows or contains. Has Intel's ownership/stranglehold on the right to manufacture x86 processors been broadly misconstrued for years?

The official record

In its 8-K filing, AMD states that it has received Intel's allegation of a material breach; in speaking with AMD's Senior Vice President of Counsel, Harry Wolin, Ars learned that Intel is asserting that Globalfoundries fails to qualify as a subsidiary of AMD based on a redacted portion of the cross-license agreement. AMD notes that it has begun the "escalating procedure for resolving disputes."�

AMD does not believe it has breached the cross-licensing agreement, and the company considers Intel's allegations of a breach to be in bad faith. If Intel's filing does turn out to be in bad faith, then AMD claims that this gives them "the right to terminate Intel's rights and licenses...while retaining the Company's [AMD's] rights and licenses under the Cross License Agreement."

It's standard operating procedure in any patent infringement lawsuit to claim that your opponent's patents are invalid/inapplicable, but the x86 agreement contains a bit of victori spolia. In the event a material breach is upheld, the breaching party loses all rights to the nonbreaching party's patents but the inverse is not true. AMD's official response, as delivered by AMD PR spokesperson Michael Silverman, claims that Intel's actions are nothing more than a desperate attempt by the larger company to redirect attention from its own actions. "Intel's action is an attempt to distract the world from the global antitrust scrutiny it faces," Silverman said. "Should this matter proceed to litigation, we will prove that Intel fabricated this claim to interfere with our commercial relationships and thus has violated the cross-license."

Intel's own official statement is fairly terse, but confirms that the CPU giant has notified AMD of its belief that the latter has breached the x86 cross-licensing agreement, and that Globalfoundries is not a subsidiary as defined within the agreement. The Intel statement also alleges that "the structure of the deal between AMD and ATIC breaches a confidential portion of that agreement." Intel goes on to state that it has requested that AMD make the relevant redacted portion of the agreement public (presumably that portion dealing with ATIC) and that AMD has thus far declined to do so.

"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."

We put the question of why AMD has kept its agreement with ATIC confidential to Silverman. "AMD would be happy to make the entire agreement public if Intel drops its insistence on secrecy concerning its exclusionary business practices under the guise of confidentiality it has imposed on evidence in the US civil antitrust case," Silverman told Ars. "There is no commercial reason to have those documents under seal; it is simply a means for Intel to try to conceal its illegal behavior."

So what about those x86 patents?

In our conversation with the company, AMD made a strong distinction between a technology license agreement, in which one company furnishes another with a vital ingredient or special sauce necessary to the function of a product, and a patent license agreement, in which two companies agree not to sue each other for intellectual property (IP) infringement. AMD's point here is rather simple: AMD neither needs nor receives any technological help from Intel when designing x86 processors. In the event that the cross-license agreement between the two companies were to be canceled, there's nothing stopping AMD from continuing to build its current products or designing future ones.

From AMD's perspective, the distinction between patent licensing and technology agreements is nontrivial; Sunnyvale is alleging that part of the reason Intel is alleging a material breach is to spread FUD within the media, the market, and potential AMD/Globalfoundries partners. In the event that the two companies cannot agreeably mediate the problems within the next 60 days, one or both of them will almost certainly file suit against the other.

AMD believes it has a strong position if the situation turns into a patent slugfest. While it's true that Intel holds the x86 patent, AMD noted to Ars that it has a number of patents of its own, including some related to the functionality of integrated memory controllers, the x86-64 instruction set, and x86 multicore configurations. The company also hinted that it may hold patents regarding the creation of an integrated CPU+GPU product on a single die—the so-called "Fusion" parts that now appear on the roadmaps of both companies.

AMD believes that any legal actions Intel might initiate as a result of this dispute would probably be sorted out in a theoretical settlement of AMD's court case against Intel (currently scheduled to begin in early 2010). Intel, for its part, isn't talking legal strategy or patent war chests; Intel spokesperson Chuck Mulloy told Ars that "the next step is mediation as outlined in the 2001 agreement. We hope to find a way to resolve this matter."