Intel's X86 license with AMD questioned

[Idontcare]

Originally posted by: AnandThenMan
Intel is going after AMD to throw a wrench in AMD's spinoff plans. They want to seed doubt into the market that AMD just might lose their X86 license. No one wants to deal with a company might lose their processor business over a legal matter. Sure, some will not buy it, some will, some may be apt to pause and consider the implications.

Whether or not this is Intel's end-goal, at a minimum it is going to be a by-product of the litigation.

And towards that end I agree with the stated summation of the net effect. This is the best thing Intel could do to support their recent BFF TSMC...GlobalFoundries represents a threat to TSMC in two ways - first and foremost they can entice customers away from TSMC, but until GlobalFoundries proves itself capable of meeting timelines, delivering the process tech they promised customers, and providing the backend chip development support that fabless chipsellers have come to expect because of TSMC there really isn't going to be all that many defections from the TSMC camp to the GlobalFoundries business. (not for at least 3-4 yrs minimum)

However more pressing for TSMC is the fact that GlobalFoundries will enable existing TSMC customers to obtain rate quotes from another potentially viable foundry (likely to be quoted at or below cost to entice new business) and those customers will then leverage those quotes to renegotiate their long(er) standing TSMC contracts, as well as any new contracts, for markedly lower prices per wafer.

This (contract price negotiation) is a threat TSMC nearly immediately. You can bet Nvidia is already busy getting a quote from GlobalFoundries for 32nm business, with really no serious intentions of moving to GlobalFoundries but they will use that low-ball quote to negotiate much lower contract prices out of TSMC. GlobalFoundries may even be using this aspect of business reality to their advantage, quoting even lower low-ball prices knowing full-well that they won't actually be asked to produce at such loss-leading prices but rather they quote them knowing it is going to be used to hurt TSMC all the more.

(this business strategy exists by the way, I directly worked with foundries UMC, TSMC, Chartered in the past, this is how that business works)

So Intel suing AMD, raising the question of GlobalFoundries viability, is going to be immediately used by TSMC contract negotiators to counter any existing customer's efforts to renegotiate prices based on globalfoundries quotes.

It really doesn't matter whether this is Intel's primary objective or more of an ancillary side-benefit, you know it is making the TSMC folks have a little more bounce in their step today and is definitely irritating the GlobalFoundries executive team. This could drag out for three years and Intel could ultimately lose their case but in the meantime GlobalFoundries operates under a cloud of FUD (fear, uncertainty, and doubt) over their ability to service customers who sign-up today to have chips produced 3-4 yrs from now.

And that would be Mission Accomplished.

 

[exar333]

Originally posted by: AnandThenMan
It turns out that AMD is in fact the one that has filed an 8-K form with the SEC.

If I understand this correctly, AMD has initiated the "escalated procedure" not Intel. Either way, the contract is specific and requires this procedure to take place, where the final judgment on who is in breach will be decided in court. No such case has taken place, so Intel cannot stop AMD from doing anything until it does.

http://idea.sec.gov/Archives/e...19312509054552/d8k.htm

Advanced Micro Devices, Inc. (the ?Company?) has received correspondence from Intel Corporation (?Intel?) related to the 2001 Patent Cross License Agreement between the Company and Intel (the ?Cross License?). In this correspondence, Intel (i) alleges that the Company has committed a material breach of the Cross License through the creation of the Company?s GLOBALFOUNDRIES joint venture and (ii) purports to terminate the Company?s rights and licenses under the Cross License in 60 days if the alleged breach has not been corrected.

The Company strongly believes that (i) the Company has not breached the terms of the Cross-License and (ii) Intel has no right to terminate the Company?s rights and licenses under the Cross License. Under the terms of the Cross License, there is an escalating procedure for resolving disputes, and the Company has commenced the application of that procedure with respect to Intel?s purported attempt to terminate the Company?s rights and licenses under the Cross License. In addition, the Company has informed Intel that the Company maintains that Intel?s 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 which gives the Company the right to terminate Intel?s rights and licenses under the Cross License Agreement while retaining the Company?s rights and licenses under the Cross License Agreement.

edit - to make sense of the last part. It essentially means that in the agreement, it is stated that if either party does NOT use the correct dispute procedure, then the party that did not adhere to the procedure, is in fact in breach of the agreement. And being in breach, in this case would mean Intel loses the right to use AMD tech, but AMD does not lose the rights to use Intel tech.

Again, all of this is subject to legal wrangling, and if need be decided in court. It is not something that can be arbitrarily decided by either party just because they say so.

Here is an actual lawyer who weighs in on the subject

It would take at least three years for Intel to get a court order to force AMD to stop making processors, according to Mark Walters, a patent lawyer in the Seattle office of Darby & Darby PC.

More pro-AMD bias?

Interesting that I got a huge AMD banner add from that link you provided to computerworld.com.

Anyway, I agree that this will take a long time to sort out. It may or may not be Intel's main goal to cause doubt around the foundry company, but it may be a side-effect in the short-term. I will say again that it is doubtful Intel filed this needlessly, and they have their reasons. Whether these reasons are good or bad for competition remains to be seen.

 

[heyheybooboo]

I tend to see this as more of an opportunity for TFC.

Supply/demand instability in this economy is going to close some doors. Global Foundries will not begin business under a cloud as they are sitting on what may be the largest wallet in the world.

TSMC is the 'Chipzilla' of semiconductor foundries - no worries there - but the industry has some attractive low-hanging fruit that is ripe for the picking over the next 12 months. Merger rumors are a-swirling. There will be a necessary 'consolidation' of the second-tier semis (**cough-cough** UMC, SMIC, Chartered).

The questions are more one of Asian governmental support of the foundries and how open they will be to partnering with the UAE.

I think Intel, rightfully, sees this as a potential threat.

 

[AnandThenMan]

Originally posted by: ExarKun333

More pro-AMD bias?

Interesting that I got a huge AMD banner add from that link you provided to computerworld.com.

You really think a banner is enough to discredit a site? This site has more than their share of Intel banners, I then must assume you see Anandtech.com as blatantly Intel biased, going by that.

 

[Viditor]

Originally posted by: Idontcare

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".

That's it!? That's AMD's defense? I have a sick feeling in the pit of my stomach that AMD is taking legal counsel from the law offices of Larry, Curly, and Moe.

It's just positioning...
This all happened last time the contract was nearing expiration (the contract expires at the end of 2010). Both companies started leveling all kinds of wild accusations at each other (none actually went to court), and I'm sure they tried to use them in the negotiations for the agreement.

 

[Viditor]

Originally posted by: AstroManLuca

Originally posted by: bfdd

Originally posted by: AstroManLuca
Not to mention Intel themselves are relying on AMD for x86-64.

But since x86-64 is an instruction set based on x86, doesn't Intel have legal rights to use it since AMD was only able to develop it because they were licensing x86 from Intel?

I don't think so. IANAL, but I believe the most Intel could do would be to halt AMD's production of x86 CPUs. Since x86-64 is a superset of x86, this would lead to a total production halt. By the same token, AMD could stop Intel from producing x86-64 CPUs (but not x86-only ones).

The point is that the best course of action for both companies is to back down.

Neither AMD nor Intel could produce so much as a single cell of SRAM without the others licensing...
They each have literally hundreds of patents that both use every day.

 

[Idontcare]

Originally posted by: Viditor
It's just positioning...
This all happened last time the contract was nearing expiration (the contract expires at the end of 2010). Both companies started leveling all kinds of wild accusations at each other (none actually went to court), and I'm sure they tried to use them in the negotiations for the agreement.

Of my general passing recollection on Intel's legal strategy, their timing and choice of targets, they tend to structure these with the intent of settling out of court in a way that enables them to procure some form of IP for which a straight-up sale would have been prevented by the DOJ as anti-competitive.

I recall around 1997 timeframe Intel wanted some IP from DEC, they tried to buy/license it (DEC was willing to license) but for some reason the transaction was blocked by a judge at some level in the hierarchy of the judicial branch. So Intel sued DEC for some other unrelated IP violation, DEC countersued for similar reasons, then both suits were settled out of court for the surprising result of DEC transferring IP rights to Intel (imagine that :Q) and Intel transferring $150m IIRC to DEC. Problem solved.

So my first thoughts when I saw the NV lawsuit was "what does Intel want out of this that they can't otherwise procure because it would be blocked as anti-competitive anti-trust?" and likewise when Intel threw this claim at AMD.

It seems all too orchestrated and I am not entirely willing to allow myself to be convinced that AMD and NV aren't playing along with whatever pre-agreed upon strategy is being run out here.

 

[Flipped Gazelle]

In further news, attorneys for Ringo Starr and Paul McCartney, the two surviving members of 1960's hit-machine The Beatles - aka "The Fab Four" - have announced a lawsuit against TSMC, AMD and Intel. Defendants are accused of referring to walkthrough's of their chip-making factories as the "Fab Tour".

 

[Idontcare]

Originally posted by: Flipped Gazelle
In further news, attorneys for Ringo Starr and Paul McCartney, the two surviving members of 1960's hit-machine The Beatles - aka "The Fab Four" - have announced a lawsuit against TSMC, AMD and Intel. Defendants are accused of referring to walkthrough's of their chip-making factories as the "Fab Tour".

Finally, AMD is reaping the first rewards of going fabless! That lawsuit heads towards GlobalFoundries my friend, AMD ducks out with almost a month to spare

 

[Vee]

When it's eventually proceeded through court, contract law tends to be pretty straightforward.
And as I see it, right now Intel is indeed, really, in major breech of the agreement and AMD is not. Whether AMD will, in some future, be in breach of the agreement or not is then irrelevant.
I have a hard time seeing it in any other way.
And that means AMD retains all their rights and Intel loses all theirs. So yes, Intel has some hard negotiating to do and their lawyers seem to have made a major mistake.
They seem to have been too eager to exploit what they saw as an opportunity.

Well, well, after all the vile things Intel have done over the years, maybe there is justice after all.

...And this means Intel will lower prices very significantly again. Maybe even dramatically on their Core i7.

 

[Cogman]

Originally posted by: Vee
When it's eventually proceeded through court, contract law tends to be pretty straightforward.
And as I see it, right now Intel is indeed, really, in major breech of the agreement and AMD is not. Whether AMD will, in some future, be in breach of the agreement or not is then irrelevant.
I have a hard time seeing it in any other way.
And that means AMD retains all their rights and Intel loses all theirs. So yes, Intel has some hard negotiating to do and their lawyers seem to have made a major mistake.
They seem to have been too eager to exploit what they saw as an opportunity.

Well, well, after all the vile things Intel have done over the years, maybe there is justice after all.

...And this means Intel will lower prices very significantly again. Maybe even dramatically on their Core i7.

Honestly, That isn't a good thing for AMD. Intel is competitive at the prices they are at now, if they drop prices further, it would kill AMD.

 

[OCGuy]

AMD may fail on its own, without the help of Intel.

 

[magreen]

Originally posted by: Vee
When it's eventually proceeded through court, contract law tends to be pretty straightforward.
And as I see it, right now Intel is indeed, really, in major breech of the agreement and AMD is not. Whether AMD will, in some future, be in breach of the agreement or not is then irrelevant.
I have a hard time seeing it in any other way.
And that means AMD retains all their rights and Intel loses all theirs. So yes, Intel has some hard negotiating to do and their lawyers seem to have made a major mistake.
They seem to have been too eager to exploit what they saw as an opportunity.

Well, well, after all the vile things Intel have done over the years, maybe there is justice after all.

...And this means Intel will lower prices very significantly again. Maybe even dramatically on their Core i7.

Do you have a reason for the strong opinions you've expressed here?

 

[jones377]

Originally posted by: Vee
When it's eventually proceeded through court, contract law tends to be pretty straightforward.
And as I see it, right now Intel is indeed, really, in major breech of the agreement and AMD is not. Whether AMD will, in some future, be in breach of the agreement or not is then irrelevant.
I have a hard time seeing it in any other way.
And that means AMD retains all their rights and Intel loses all theirs. So yes, Intel has some hard negotiating to do and their lawyers seem to have made a major mistake.
They seem to have been too eager to exploit what they saw as an opportunity.

Well, well, after all the vile things Intel have done over the years, maybe there is justice after all.

...And this means Intel will lower prices very significantly again. Maybe even dramatically on their Core i7.

Exactly how did Intel break the cross licencing contract with AMD?? Essentially here is what happened so far...

INTEL: GlobalFoundries does not qualify as an AMD subsidy so you have broken our agreement. We give you a 60 day notice to correct this.
AMD: By telling us we have broken the agreement it is actually YOU who have broken the agreement with us for interfering with our business. Back off!
INTEL: what?

 

[Vee]

Originally posted by: Cogman

Originally posted by: Vee
...And this means Intel will lower prices very significantly again. Maybe even dramatically on their Core i7.

Honestly, That isn't a good thing for AMD. Intel is competitive at the prices they are at now, if they drop prices further, it would kill AMD.

That is the idea. Intel have been squeezing for a good while already. You can see it in the numbers of CPUs they've sold and their low revenues which absolutely haven't matched up. Not with normal business practices either.

Intel's legal position vs AMD is precarious and I think this is how Intel attempts to solve it. Unfortunately, I think they will succeed too. So frankly, there's no terribly big reason to sell your Intel shares, if you have any.

 

[heyheybooboo]

From Ars:

AMD, Intel x86 patent fight likely to be long and messy

Intel has filed a letter with AMD alleging that the smaller company is in breach of the x86 cross-license agreement that dictates the patent-sharing arrangement between the two entities. The mediation process has begun, but AMD isn't pulling any punches; Sunnyvale has already accused Intel of breaching the same document.

Pretty good read ...

 

[Janooo]

Originally posted by: jones377

Originally posted by: Vee
When it's eventually proceeded through court, contract law tends to be pretty straightforward.
And as I see it, right now Intel is indeed, really, in major breech of the agreement and AMD is not. Whether AMD will, in some future, be in breach of the agreement or not is then irrelevant.
I have a hard time seeing it in any other way.
And that means AMD retains all their rights and Intel loses all theirs. So yes, Intel has some hard negotiating to do and their lawyers seem to have made a major mistake.
They seem to have been too eager to exploit what they saw as an opportunity.

Well, well, after all the vile things Intel have done over the years, maybe there is justice after all.

...And this means Intel will lower prices very significantly again. Maybe even dramatically on their Core i7.

Exactly how did Intel break the cross licencing contract with AMD?? Essentially here is what happened so far...

INTEL: GlobalFoundries does not qualify as an AMD subsidy so you have broken our agreement. We give you a 60 day notice to correct this.
AMD: By telling us we have broken the agreement it is actually YOU who have broken the agreement with us for interfering with our business. Back off!
INTEL: what?

It seems an offense is the best defense.
It would be something if AMD is right and Intel missed such a simple point.

 

[aigomorla]

Originally posted by: nyker96
i don't think it's in intel's best interest to get rid of all competition in the microprocessor sector. that might leave itself in the field a sure anti trust issue for them.

microsoft is doing a dayam good job at being one.

i see Intel does not want people to have there X86, which both complaints are coming to.

So i see it this way, if intel wins one, they win the other.

There not just going for a slice of pie, they want the entire pie or none at all.

Originally posted by: jones377

Exactly how did Intel break the cross licencing contract with AMD?? Essentially here is what happened so far...

INTEL: GlobalFoundries does not qualify as an AMD subsidy so you have broken our agreement. We give you a 60 day notice to correct this.
AMD: By telling us we have broken the agreement it is actually YOU who have broken the agreement with us for interfering with our business. Back off!
INTEL: what?

LOL nice explaination.

 

[Idontcare]

Originally posted by: aigomorla

Originally posted by: nyker96
i don't think it's in intel's best interest to get rid of all competition in the microprocessor sector. that might leave itself in the field a sure anti trust issue for them.

microsoft is doing a dayam good job at being one.

MS is playing it smart by not squashing Apple and their OS. Apple being profitable but small marketshare is perfect for MS.

Originally posted by: aigomorla
There not just going for a slice of pie, they want the entire pie or none at all.

Its not really clear what exactly Intel is going after. Maybe they simply want some licensing fees for every chip produced at the foundry but AMD balked at negotiating anything that would increase their cost structure.

I just don't see them being interested in having the whole pie because the parts that are left to AMD and Via at the moment are the low-margin low-ASP stuff that isn't exactly going to boost Intel's EPS or average ASP or gross margins.

Maybe this is all about graphics and Larrabee. Maybe Intel is striking out at NV and AMD to put more pressure on those two signing cross-licensing agreements related to GPU's.

The smokescreen could be CPU and chipset contract breach, the goal may be to settle for favorable terms on some critically gating IP Intel needs access to before they can roll out Larrabee.

 

[Keysplayr]

Originally posted by: SickBeast
Alot of people were quesioning this stuff when AMD announced the foundry spinoff.

The thing is, AMD has intel by the balls in their own way. If AMD goes broke, then Intel becomes a monopoly and has to deal with the SEC. People say that it is in intel's best interest to keep AMD on life support as a very weak competitor with say 10% marketshare just to keep the SEC satisfied. Otherwise it will all go to lawyers and the government.

There is still VIA though, isn't there? Sure, their chips cannot compete, but they are still x86. Which means Intel will not be the only x86 game in town. CMIIW.

 

[Viditor]

Originally posted by: SickBeast
Alot of people were quesioning this stuff when AMD announced the foundry spinoff.

The thing is, AMD has intel by the balls in their own way. If AMD goes broke, then Intel becomes a monopoly and has to deal with the SEC. People say that it is in intel's best interest to keep AMD on life support as a very weak competitor with say 10% marketshare just to keep the SEC satisfied. Otherwise it will all go to lawyers and the government.

What you have to understand is that Intel is already a monopoly...
In business, a monopoly isn't limited to companies that own 100% marketshare. A monopoly is when a company has the ability to control the market...for example, if Intel threatened to withhold products to an OEM, that OEM would go out of business. THAT is a monopoly.

Edit: A good example is Microsoft, who was ruled to be a monopoly with slightly less than 90% of the market.

 

[Viditor]

Originally posted by: Idontcare

Originally posted by: aigomorla

Originally posted by: nyker96
i don't think it's in intel's best interest to get rid of all competition in the microprocessor sector. that might leave itself in the field a sure anti trust issue for them.

microsoft is doing a dayam good job at being one.

MS is playing it smart by not squashing Apple and their OS. Apple being profitable but small marketshare is perfect for MS.

In fact, Apple is one of Microsoft's big customers. MS Office sells very well on the Mac OS.

Originally posted by: aigomorla
There not just going for a slice of pie, they want the entire pie or none at all.

Its not really clear what exactly Intel is going after. Maybe they simply want some licensing fees for every chip produced at the foundry but AMD balked at negotiating anything that would increase their cost structure.

I just don't see them being interested in having the whole pie because the parts that are left to AMD and Via at the moment are the low-margin low-ASP stuff that isn't exactly going to boost Intel's EPS or average ASP or gross margins.

Maybe this is all about graphics and Larrabee. Maybe Intel is striking out at NV and AMD to put more pressure on those two signing cross-licensing agreements related to GPU's.

The smokescreen could be CPU and chipset contract breach, the goal may be to settle for favorable terms on some critically gating IP Intel needs access to before they can roll out Larrabee.

I think what you're forgetting is that there are 2 HUGE legal events happening next year for which Intel desperately needs more favourable conditions in their negotiations.

1. The cross-license agreement expires and must be re-negotiated. My guess is that AMD wants to negotiate away the x86 royalties free and clear, and after this length of time they might just get them.

2. The anti-trust suit finally gets heard.

I've been sort of waiting for Intel to start making noise about anything they could for some time now...

Edit: BTW, while I was also quite dubious, an attorney friend of mine tells me that Vee is quite correct and that the extraordinary pressure Intel is placing on AMD could be considered a major breach of their contract...
Will they follow it up? Doubtful...it's just another bargaining chip. Remember that the agreement is up at the end of next year anyway, and that it's very doubtful the case would even see a courtroom before then.

 

[imported_seferio]

It seems like Intel's main argument for a breach of contract is due to GF not counting as a subsidiary of AMD. However, based on the definition of a subsidiary in the cross-licensing agreement, GF does clearly seem to fall into the category of a subsidiary. AMD has a 50% voting right and has invested ownership of over 30% of the company (and I believe I read somewhere that the initial contribution by AMD is actually closer to 50%). I think what Intel is trying to dig for is how the profits of GF are going to be split. While AMD may own 34% of GF, nowhere publicly did it say that AMD gets an amount equal to its investment share in the company, and therefore could be found in breach of the agreement. I bet this piece of information is what Intel is trying to get at.

 

[Idontcare]

Originally posted by: seferio
It seems like Intel's main argument for a breach of contract is due to GF not counting as a subsidiary of AMD. However, based on the definition of a subsidiary in the cross-licensing agreement, GF does clearly seem to fall into the category of a subsidiary. AMD has a 50% voting right and has invested ownership of over 30% of the company (and I believe I read somewhere that the initial contribution by AMD is actually closer to 50%). I think what Intel is trying to dig for is how the profits of GF are going to be split. While AMD may own 34% of GF, nowhere publicly did it say that AMD gets an amount equal to its investment share in the company, and therefore could be found in breach of the agreement. I bet this piece of information is what Intel is trying to get at.

Yep, and AMD's desire to hide this very aspect of the GF contract shows that AMD knows they are treading on dangerous territory and their legal team suspects they need to hide something from the public and Intel for a reason.

Could be they are playing coy all along, setting a trap to see if Intel makes a move that itself causes breach of the contract (which appears to be AMD's counter-claim at the moment) while Intel tries to force AMD to show its hand.

Who knows, maybe the "intimidation" aspects of Intel's suit will actually be the foundation of globalfoundries own anti-trust suit against Intel.

 

[imported_seferio]

If AMD was baiting Intel, and everything works out for them Intel will be in big trouble because they will be the ones in breach of contract and will lose access to all of AMD's patents.