ktvu.com

Advanced Micro Devices announced Monday that Intel plans to pull its 2001 cross-licensing patent agreement in the next 60 days, unless concerns surrounding AMD's joint venture chip foundry are addressed. ktvu.com

Intel's warning is an escalation of concerns it expressed more than five months ago, following AMD's announcement it planned to spin off its manufacturing assets to a joint venture with the Abu Dhabi government.

The joint-chip foundry, Globalfoundries, calls for the government's Advanced Technology Investment Co. (ATIC) to own a majority 55.6 percent stake, but AMD and ATIC will hold equal voting rights. The deal officially closed earlier this month.

Under the 2001 Intel-AMD patent cross-licensing agreement, restrictions exist regarding the transfer of licenses and patents. That agreement is in place until 2010, when it expires.

Intel said its opposition stems from a belief that Globalfoundries is not a subsidiary of AMD, under the terms of the chip companies' 2001 agreement. As a result, Intel does not view Globalfoundries as having licensing rights to its patents.

Bruce Sewell, Intel general counsel, said in a statement:

Intellectual property is a cornerstone of Intel's technology leadership and for more than 30 years, the company has believed in the strategic importance of licensing intellectual property in exchange for fair value. However AMD cannot unilaterally extend Intel's licensing rights to a third party without Intel's consent.

AMD, however, views Globalfoundries as a subsidiary of AMD and sees Intel's latest warning is an attempt to box in its rival, said Harry Wolin, AMD general counsel.

He added that ATIC, through the joint venture, will provide AMD with the capital needed to have state-of-the-art manufacturing technology, posing a greater competitive threat to Intel and its foundries.

AMD also views Intel's actions as a means to distract the public's attention from its recent antitrust battles with the European Commission, as well as in Japan, Korea, and the U.S.

For AMD, the 2001 Intel agreement allows it to manufacture chips using Intel's x86 design, while providing Intel access to its chip patents.

The companies have had a long-standing patent and licensing relationship, going back to 1976. ktvu.com

But this latest turn of events could result in a change in that relationship. AMD, in its filing with the Securities and Exchange Commission on Monday, said Intel sent it a letter that alleges AMD "committed a material breach of the Cross License through the creation of the company's Globalfoundries joint venture and purports to terminate the company's rights and licenses under the cross license in 60 days if the alleged breach has not been corrected."

AMD notes that the parties seek to resolve the issue through mediation and that both are currently taking the stance that the other has materially breached the 2001 agreement.

Under the 2001 deal, a party that has been found to be in material breach of agreement will no longer have access to the patents and licenses.

AMD, in its filing, stated that it "strongly believes that the company has not breached the terms of the cross-license and Intel has no right to terminate the company's rights and licenses under the cross license."

AMD shares rose 5.56 percent to $2.66 a share in morning trading, on a day when the Dow Jones Industrial Average was up.