Intel expresses concern about the AMD split and intellectual property

For the better part of two decades, AMD has been a producer of x86 chips, and at times sold more of them to consumers than Intel. So since x86 technology was conceived by Intel, what happens to it now that someone else will build upon it?

In an agreement between the two microprocessor manufacturers reached in the spring of 2001 and retroactive to the previous January, Intel granted AMD a license to make certain products that contain Intel's intellectual property; and AMD granted Intel a symmetrical license under that same agreement. A redacted publication of that agreement -- which is the only version that has been allowed to be made public -- clearly shows where AMD was granted "a non-exclusive, non-transferable [redacted] worldwide license, without the right to sublicense, under Intel's Patents to...make, use, sell (directly or indirectly), offer to sell, import and otherwise dispose of all AMD Licensed Products."

It's that "without the right to sublicense" that has Intel concerned today. As Intel corporate spokesperson Chuck Mulloy told BetaNews this afternoon, his company has questions as to whether AMD can effectively enter into its planned agreement with investors, creating a new and independent company that would be majority-owner of a foundry that makes AMD chips, among others, without transferring some of Intel's IP in the process -- a transference which the 2001 agreement would appear to prohibit.

Although the agreement does specify what intellectual property of Intel's that it has concerns with, the identity of that IP is completely redacted in the public version. "'AMD Licensed Products' shall mean *****," is all that the public version says; and as Mulloy told BetaNews, Intel would have been happy to fill in that gap for BetaNews, but is currently precluded from doing so -- implying that only AMD wants this portion to be confidential.

But Mulloy did say this agreement does generally cover Intel's patents for x86 processor technology, and is the principal vehicle by which Intel receives royalty payments for that technology. Neither Intel nor anyone else, Mulloy said, knows enough about the specifics of AMD's new business model to be comfortable yet with whether that agreement can continue.

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

According to an investors' backgrounder released yesterday by the new venture (PDF available here), what's currently being called The Foundry Company will be 55.6% owned by the new investors' group ATIC, and 44.4% by AMD. However, it will be a privately held firm, says the backgrounder, which will "have only AMD and ATIC as stockholders, each of which at the closing will have equal voting rights."

The new company will undoubtedly need AMD's expertise in producing x86 chips to be able to accelerate its plans -- which had, up until this week, been AMD's plans -- to upgrade the existing AMD production facilities and also finally get under way with plans to build a 300 mm, 32 nm production facility -- the long-planned Fab 4x -- in Saratoga County, New York. And some of that expertise is in designing chips for compatibility with an instruction set conceived originally by Intel.

The difference between 44.4% ownership and 50% control is a significant one for legal reasons, Mulloy explained. The Foundry Company has already joined the IBM Alliance, which is a clear indication that the new firm plans to produce chips for customers besides AMD.

An FAQ published yesterday on the new company's Web site reads, "Our prospective customer base will include AMD and other semiconductor companies requiring leading edge production capabilities." So Intel's concerns, as explained to us by Mulloy, are that AMD may not be in a position to fully protect the IP licensed to it by Intel, especially if it finds itself the minority owner of the place where Intel's IP is put to use.

AMD spokesperson Michael Silverman responded this afternoon to Intel's concerns, telling 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."