12 November 2009—Intel and Advanced Micro Devices, of Sunnyvale, Calif., say they've reached a comprehensive agreement to end all outstanding legal issues between the companies, including antitrust litigation and patent cross-license disputes. The settlement, in which Intel will pay AMD US $1.25 billion, leaves AMD the victor in a years-long battle that has involved government raids on Intel offices, multimillion dollar lawsuits, and huge fines. It could end some ongoing government legal actions against Intel, but others will likely continue. The deal also frees AMD to use Intel technology to manufacture its chips in any foundry.
"It's a pivot from war to peace," says Thomas M. McCoy, executive vice president of legal, corporate, and public affairs at AMD.
John Peirce, partner and antitrust lawyer at Bryan Cave, suggests that the motivation to settle was economic. "The litigation between Intel and AMD was massive, expensive, and time-consuming, so in these economic conditions they apparently decided it was better to bury the hatchet and concentrate on their core product business," he says.
As part of the settlement, Intel agreed to a set of business practices, to be detailed in a filing with the U.S. Securities and Exchange Commission later today, which are meant to prevent Intel from making exclusive deals with computer makers. "Intel will not be able to condition doing business with them on not doing business with us," says AMD's McCoy. "They can't use inducements in order to force exclusive dealings, to delay customers from using our products, [or to] delay or prohibit a company that's advertising our products or systems using our products."
Government regulators around the world, especially in Europe and Japan, have been investigating AMD's allegations that Intel unfairly used its near-monopoly position to try to push AMD out of the market. The European Commission Directorate General for Competition ruled in May that Intel should be fined €1.06 billion (US $1.45 billion) for strong-arming computer makers into excluding or limiting their use of AMD chips. And last week the New York State attorney general filed a similar suit against Intel.
Now, per the agreement, AMD will be dropping a case filed in the U.S. District Court in Delaware and two cases pending in Japan, among others. The company will also withdraw all of its regulatory complaints worldwide. "In places in the world where AMD had complaints against us, they will be withdrawn," Paul Otellini, Intel's CEO, told reporters. "In places where governments are asking questions, those will continue."
Albert A. Foer, president of the American Antitrust Institute, believes the government actions can continue despite the agreement between Intel and AMD. "The settlement of this sort would not be binding on any government," he says. The United States Federal Trade Commission "may conclude that certain issues have been left open and that federal intervention is still necessary to help clarify the legal standards," he says. The same could be true in the New York State attorney general's case. "Even the European case, which is on appeal, does not necessarily disappear as a result of the settlement," Foer says.
One anticompetitive action Intel had been accused of was retroactively giving steep discounts or rebates to computer makers if they limited their use of AMD chips. The legality of that practice has not been definitively settled in the United States, says Foer. The FTC might want "to continue its case in order to develop the law."
In addition to the antitrust issues, the Intel-AMD deal settles an intellectual property spat that erupted last March. The two companies had been cross licensing a group of patents since 2001, but when AMD split off its manufacturing arm to form joint venture Global Foundries, Intel claimed that its patents could not be used by an outside manufacturer to make AMD's chips, including Global Foundries. Today's settlement, which provides for a new five-year cross-license agreement, lets AMD make its chips at any foundry. "They are free to use anyone they want to build their products," says Otellini.
Intel must pay AMD the $1.25 billion in cash within 30 days. "While it pains me to write a check at any time, in this case I think we made a practical settlement," Otellini says. "In many ways, it was a small multiple of the potential damages that could be awarded in a jury trial."