AMD 1993 Annual Report Download - page 383

14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. CONTINGENCIES
AMD/INTEL LITIGATIONS
AMD is currently involved in the following disputes with Intel Corporation: (1)
the AMD/Intel Technology Exchange Agreement Arbitration, (the "Arbitration");
(2) the 287 Microcode Litigation; (3) the 386 Microcode Litigation; (4) the 486
Microcode Litigation; (5) the Intel Business Interference Case; (6) the Intel
Antitrust Case, and (7) the International Trade Commission Proceeding ("ITC
Proceeding").
Technology Agreement Arbitration. A 1982 technology exchange agreement (the
"1982 Agreement") between Advanced Micro Devices and Intel Corporation has been
the subject of a dispute which was submitted to Arbitration through the
Superior Court of Santa Clara County, California, and it is now at the
California Supreme Court on appeal. The dispute centers around issues relating
to whether Intel breached its agreement with AMD, whether that breach injured
AMD, and what the remedies should be for the injuries caused to AMD. The
California Supreme Court is expected to render its decision by the end of 1994.
The company believes it has the right to use Intel technology to manufacture
and sell AMD's microprocessor products based on a variety of factors including:
(i) the 1982 Agreement, (ii) the Arbitrator's award in the Arbitration which is
pending review by the California Supreme Court and (iii) the terms of the 1976
patent and copyright agreement providing AMD patent and copyrights to Intel
products (the "1976 Agreement"). An unfavorable decision by the California
Supreme Court could materially adversely affect the company's financial
condition and results of operations as well as other AMD/Intel Microcode
Litigations discussed herein. The AMD/Intel Litigations involve multiple
interrelated and complex issues of fact and law. Therefore, the ultimate
outcome of the AMD/Intel Litigations cannot presently be determined.
Accordingly, no provision for any liability that may result upon the
adjudication of the AMD/Intel Litigations has been made in the company's
financial statements.
Microcode Litigations. Intel Corporation has filed three suits against the
company, alleging copyright infringement involving AMD's use of Intel microcode
in the Am80C287(TM) math coprocessors, the Am386 microprocessors and the Am486
microprocessors. The suits generally allege that the company violated
copyrights on Intel microcode and concern two agreements between Intel and the
company: (1) the 1976 Agreement and (2) the 1982 Agreement. The Microcode
Litigations are all in various stages of litigation.
Depending on the result and the status of the Microcode Litigations, an
unfavorable decision in any single or combination of the Microcode Litigations
could result in a material monetary damages award to Intel and/or preclude the
company from continuing to produce Am386 and Am486 products containing Intel
copyrighted microcode, and thus could materially adversely impact the company's
financial condition and results of operations. The AMD/Intel Litigations
involve multiple interrelated and complex issues of fact and law. Therefore,
the ultimate outcome of the AMD/Intel Litigations cannot presently be
determined. Accordingly, no provision for any liability that may result upon
the adjudication of the AMD/Intel Litigations has been made in the company's
financial statements.
Intel Antitrust, Business Interference and ITC Cases. The company filed an
antitrust suit against Intel Corporation in 1991, alleging that Intel engaged
in a series of unlawful acts designed to secure and maintain a monopoly in iAPX
microprocessor chips ("Intel Antitrust Case"). AMD seeks significant monetary
damages (which may be trebled) and an injunction requiring Intel to license the
80386 and 80486 to AMD, or other appropriate relief.
In November 1992, the company filed an action in the Superior Court of
California against Intel for tortious interference with prospective economic
advantage, violation of California's Unfair Competition Act, breach of contract
and declaratory relief arising out of Intel's efforts to require licensees of
an Intel patent to pay royalties if they purchased 386 and 486 microprocessors
from suppliers of those components other than Intel (the "Business Interference
Case"). No trial date has been set.
The United States International Trade Commission Proceeding ("ITC
Proceeding") was filed by Intel Corporation in May 1993, against Twinhead, a
Taiwan-based manufacturer which is a customer of both AMD and Intel. Intel
claims that Twinhead induces computer end-users to infringe on what is known as
the Crawford '338 patent when its computers, containing non-Intel 386 and 486
microprocessors, are used with multi-tasking software such as Windows, Unix or
OS/2. Intel seeks a permanent exclusion order from entry into the United States
of certain Twinhead personal computers and an order directing Twinhead to cease
and desist from demonstrating, testing or otherwise using such computers in the
United States. AMD's dispute with Intel in the Intel Business Interference Case
(discussed above) requests a declaration that the Crawford '338 patent is
invalid; accordingly, AMD intervened in the ITC Proceeding as a real party in
interest by filing a motion with the ITC to intervene on the side of the
respondents, and such motion was granted. The company has vigorously contested
the relief Intel seeks. An unfavorable outcome in the ITC Proceeding could have
an adverse effect on the company's ability to sell microprocessors to Twinhead
and other computer manufacturers in Taiwan and potentially, other countries.
ENVIRONMENTAL MATTERS
Cleanup Orders. Since 1981, the company has discovered, investigated and begun
Source: ADVANCED MICRO DEVIC, 10-K, March 07, 1994