GlobalFoundries needs to pay for x86 license, Intel says

Intel wants AMD's former manufacturing arm, GlobalFoundries, to pay for an x86 license.

GlobalFoundries, the former manufacturing arm of rival Advanced Micro Devices, needs to pay Intel for a license to manufacture x86 processors, an Intel spokesman said Tuesday.

Intel notified AMD on Monday that it believes the creation of GlobalFoundries violated the terms of the cross-license agreement that gives AMD access to the x86 instruction set and other processor technologies owned by Intel. GlobalFoundries is a joint venture between AMD and an Abu Dhabi investment fund.

"AMD has an agreement with Intel and the third party, represented by GlobalFoundries, has no rights unless they sit down to talk with us," said Chuck Mulloy, an Intel spokesman. "We've always been willing to license our technology and our patent rights in exchange for fair value. We need to have that discussion."

However, Intel has not contacted GlobalFoundries to discuss the patent licensing issue. "At this point, it's between Intel and AMD," Mulloy said.

The dispute between Intel and AMD threatens the technology ties that both companies depend upon. In its notice to AMD, Intel warned it intends to revoke AMD's right to use these patents, a move that seemingly aims to either drive AMD out of the x86 processor business or force the company and GlobalFoundries to renegotiate the cross-license agreement on terms more favorable to Intel.

Intel's notice triggers the start of a dispute-resolution mechanism that involves a mediator to resolve differences between the two companies, Mulloy said.

AMD didn't take long to respond to Intel, claiming in a filing submitted to the U.S. Securities and Exchange Commission on Monday that Intel's notice was itself a breach of the cross-license agreement.

"Its very much a two-way street," said Patrick Moorhead, vice president of marketing at AMD, in an e-mail. "We told Intel that their attempt to terminate our license is a breach of the cross-license which gives us the right to terminate Intel's license."

AMD isn't the only company that would be hurt if the companies lose access to the other's technology portfolios. Losing access to AMD's technology patents would hurt Intel by restricting access to key AMD technologies that the company depends on for its Nehalem family of processors. These and other Intel chips incorporate AMD technology for multicore processors, integrated memory controllers, and 64-bit extensions to the x86 instruction set.

Mulloy dismissed AMD's assertion that Intel's notice had broken the cross-license agreement. "Notifying them that there's a dispute and a breach does not constitute a breach," he said.

The dispute with AMD comes at an awkward time for Intel. Antitrust regulators in key markets outside the U.S. appear to be closing in on Intel, and the company faces a U.S. antitrust action brought against it by AMD.

In its defense against antitrust claims, Intel has repeatedly said that the x86 processor market remains fiercely competitive. But Intel's latest move highlights the significant market power it carries over rivals by taking action that could lead to termination of the cross-license agreement that gives AMD the right to make and sell x86 processors.

Intel said its decision to notify AMD of the alleged breach of the cross-license agreement is not connected to any of the antitrust suits it faces.

"AMD signed a cross-license agreement in 2001. It laid out specifically what their rights were and what Intel's rights were. We're saying they breached that agreement, it has nothing to do with any of the antitrust allegations around the world," Mulloy said. "They signed an agreement and we want to hold them to the terms of that agreement."

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