Tom's Hardware talks to Intel to find out more details about the cross-licensing water boiling between the two companies.

Earlier today we reported on Intel's threat to AMD, requesting compliance with the terms of the two's cross-licensing agreement or AMD must cease to sell or marketing x86 architecture products. AMD then responded to Intel's claims, indicating that it had done no wrong, and the circumstances of Globalfoundries is in compliance with the original terms of the agreement, specifically these:

3.8.  Licenses and Subsidiaries.
      -------------------------

      (a)   Intention for Subsidiaries to be Bound.

            (1)   Except as expressly set forth herein, the parties intend that
                  this Agreement shall extend to all of each party's
                  Subsidiaries. The parties agree that to the extent they are
                  not already bound, each party shall use reasonable and
                  diligent efforts to ensure that all such Subsidiaries are
                  bound by the terms of this Agreement.

            (3)   Notwithstanding the foregoing, however, both parties
                  understand and intend that there are circumstances in which a
                  party could reasonably agree in good faith with an independent
                  third party that the party would not have rights to license
                  and/or enforce Patents directed to inventions developed in
                  conjunction with employees and or contractors of
                  such third party. For example, both parties understand that it
                  could be reasonable under the circumstances for a party to
                  agree in good faith not to have rights to license and/or
                  enforce Patents directed to inventions that arise out of:
                  *****.

            (4)   Either party to this Agreement shall have the right to request
                  a written confirmation or denial from the other party to this
                  Agreement that a specific Subsidiary is (or is not) bound by
                  this Agreement. A party receiving such a request shall provide
                  such written confirmation (including a full explanation in
                  support of such confirmation or denial) within 30 days after
                  the receipt of the request.

The above is directly from the agreement signed between AMD and Intel back in early 2001.

According to AMD, it believes that Globalfoundries is a subsidiary, and thus, fully complies with the original terms. However, Intel says that based on public filings done by AMD as well as confidential ones, Globalfoundries is not a true subsidiary. Intel stated that the fact that AMD invests into building Globalfoundries does not make Globalfoundries an AMD subsidiary.

We were also told that there has been some left-handed funds transferring by AMD and ATIC. According to Intel, it did not agree to have more than one controlling parent company run the new corporate entity, and that AMD did not approach Intel in a reasonable fashion about this. Intel also mentioned that it did not agree to this from the beginning. The way that Globalfoundries is set up, allows ATIC and its subsidiaries to utilize x86 technologies. Intel says that even the public filing from AMD indicates evidence that Globalfoundries is not a true subsidiary.

Intel also points to AMD's FCC filing claims, which defer from AMD's public claims of what greater than 50-percent ownership means. On AMD's public filing, it claims that it invested $1.2 billion into the company plus assets to match, but there was a cutback from ATIC to AMD in the form of roughly $900 million, lowering AMDs cash investment down to just roughly $300 million. In AMD's FCC filing, it indicated that it only owns 34.2 percent, not the 50-percent that Intel says AMD is claiming.

In fact, Intel says that Globalfoundries has very powerful veto-power over decisions that AMD makes. Under some situations, AMD would have to go to Globalfoundries for approval on certain contractual IP agreements that it wants to sign with Intel.

From Globalfoundries' press release:

ATIC will invest $2.1 billion to purchase its stake in The Foundry Company, of which it will invest $1.4 billion directly in the new entity and the remainder will be paid to AMD to purchase additional shares in The Foundry Company.  The Foundry Company will also assume approximately $1.2 billion of AMD’s existing debt.  ATIC has committed additional equity funding to The Foundry Company of a minimum of $3.6 billion and up to $6.0 billion over the next five years to fund the expansion of The Foundry Company’s chip-making capacity beyond the manufacturing facilities initially contributed by AMD.

Intel's Chuck Mulloy also explained to us that AMD's threat of using other patent agreements to threaten Intel into stepping down is also a breach of their own. Mulloy told Tom's Hardware that AMD and Intel are at the table specifically to discuss the patent agreement signed in 2001, not about things to do with 64-bit architectures or integrated memory controllers. However, AMD stated that it would possibly terminate Intel's ability to use certain patents related to those technologies, if it did not retract its 60-day termination notice.

"x64, integrated memory controller, and such, have nothing to do with why we're giving a notice to AMD here," said Mulloy.

Michael Silverman from AMD refutes Intel's claim:

The terms of our Asset Smart transaction were crafted very carefully to ensure full compliance with the cross-license agreement.
 
The Cross License agreement states that a subsidiary is one in which a party owns or controls 50 percent of outstanding shares or voting rights; as well as owns at least 30 percent of the profit interest of the entity. AMD has 50 percent economic ownership  and 50 percent management control (voting rights) in GLOBALFOUNDRIES; and on a fully-converted  common stock basis (ATIC holds convertible notes, but they are not convertible at this time), AMD owns 34.2 percent of GLOBALFOUNDRIES. So very clearly, by definition, GLOBALFOUNDRIES is indeed a subsidiary in the Cross License Agreement.
 
A redacted version of the current cross license agreement is available here:
http://contracts.corporate.findlaw.com/agreements/amd/intel.license.2001.01.01.html

Source : Tom's Hardware US