Intel pays rival AMD $1.25 billion in intellectual property dispute

Microchip manufacturer Intel has paid rival Advanced Micro Devices $US1.25 billion as part of a settlement that will see the two companies walk away from a four-year long dispute over patent and antitrust allegations.

But intellectual property lawyer Steve White says the ongoing dispute is an unusual one, and that businesses in Australia shouldn’t necessarily get involved in disputes dragged out over several years.

“Other businesses should be amazed at the amount of money these companies have in order to engage in that sort of litigation for so long,” he says.

“The payment is unusual, because usually the companies would agree to just develop a cross-licensing program. But this case has dragged on for some time… and other businesses should realise it’s because they have the money to do so.”

The two companies have now agreed to a new five-year cross-license pact, with the settlement covering all current antirust and patent disputes.

AMD sued Intel during 2005, after it alleged the company controlled the market by giving discounts to customers which avoided AMD products.

The two companies have accused each other of license disputes ever since the 1980s.

But while Intel has continued to say its tactics, which involved persuading manufacturers such as Dell to include Intel chips in their computers, were completely legal, chief executive Paul Otellini said a new agreement has been reached.

The new agreement involves adhering to a set of “business practice provisions”, he said, which will involve regular talks between the two companies to resolve disputes instead of heading to court.

Additionally, the five-year cross-licensing deal will also allow AMD to restructure its manufacturing unit by outsourcing chip making instead of keeping the process in-house. Both companies said the settlement will allow each to focus on research and development.

It comes at a desperate time for AMD, which is suffering under nearly $US4 billion in debt. It has struggled against Intel’s 80% market share, after controlling 26% of the market during 2006, and has posted 12 consecutive quarterly losses.

“While it pains me to write a cheque at any time, I think we have made a practical settlement and a good compromise between the two companies,” Otellini said.
Meanwhile, AMD chief executive Dick Meyer said in a statement the company is pleased with the decision and hopes it will give the company better opportunities to compete.

“It is an important milestone for us, for our customers, our partners and, most important, for consumers and businesses worldwide,” he said. “We are optimistic that it will usher a new era for our industry.”

Similar tactics have brought Intel plenty of attention from overseas authorities. The company was fined $US1.45 billion in Europe after regulators accused it of bullying PC manufacturers into avoiding AMD chips.

Meanwhile, the New York attorney-general, Andrew Cuomo, has accused Intel of abusing its market dominance by “ruling with an iron fist”. The US Federal Trade Commission is also involved in investigating the company.