In Case You Did Not Know

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In case you haven’t been looking, AMD’s stock hasn’t been doing too well lately. The stock has dropped by a bit over 50% the last two months, and about a third in the last month.

When this sort of thing is mentioned or discussed at the technical websites, a common response is, “Don’t worry, somebody will take them over.”

It doesn’t seem those people are aware of this document.

This is a Patent Cross License Agreement between AMD and Intel. This allows AMD and Intel to use each other’s patents and copyrights. It was signed in 2001, and will remain effective for at least another ten years.

Unless . . . .

If you like to read legal contracts, click on the link above, and look at clause 6.2 of the agreement.

If you don’t, what clause 6.2 appears to say is that if AMD gets taken over or goes bankrupt, Intel has the right to end AMD’s right to use Intel’s patents and copyrights after sixty days notice.

This would seem to mean AMD couldn’t make x86 processors anymore.

You might ask, “Wouldn’t vice versa be just as true?” and the answer is no. The terminator would retain all rights granted under the agreement, even after termination.

If all this is true, then Intel effectively has a veto power over any takeover of AMD or could put the CPU part of AMD completely out of business after a bankruptcy.

Yes, there are large parts of the contract left out, so it is possible there is language in the blanks which would make this interpretation incorrect. However, this contract is common knowledge in financial circles, and if it were not so, you’d think AMD would have corrected this interpretation if not so.

It is also true that this is a clause in a legal contract, not the U.S. Constitution, and at the very least, Intel would probably be under intense financial and/or political pressure not to knock out its only serious CPU competitor based on that clause. Even if Intel insisted on its pound of flesh, there would probably be a big legal battle as a result.

Nonetheless, this agreement is yet another deterrent keeping another, richer company from buying AMD (or a lender forcing AMD into bankruptcy if it defaulted on the terms of one of its loans).

Just thought you should know.

Ed


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