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AMD Cleared of Infringing on Intel Chips : Courts: The jury decision is a pivotal one for Advanced Micro Devices. Intel vows it will appeal.

March 11, 1994|MARTHA GROVES | TIMES STAFF WRITER

SAN FRANCISCO — Advanced Micro Devices Inc. won a pivotal victory Thursday in a long-running and closely watched case when a federal jury in San Jose cleared the computer chip maker of infringing Intel Corp. copyrights.

The verdict means that AMD, a onetime Intel ally-turned-courtroom-belligerent, can continue selling its popular 486DX chips in competition with the industry leader. Analysts said the decision could boost AMD's fortunes by sweeping away a cloud that perhaps has restrained enthusiasm for the company's products.

"This is a big win for Advanced Micro Devices, but an even bigger win for computer users," an exultant Jerry Sanders, the Sunnyvale-based company's flamboyant chief executive, told reporters and investment analysts in a conference call. He added that AMD can now "be a contender for leadership" in the computer chip industry.

Intel, which controls 75% to 80% of the worldwide $8.8-billion microprocessor market, vowed to appeal the verdict. It is the second in the complex case. In 1992, a jury found in Intel's favor, but the trial judge tossed out that decision, contending that Intel had inhibited AMD's defense by withholding certain documents.

"We now have two distinctly different jury verdicts," said F. Thomas Dunlap, vice president and general counsel of Intel, based in Santa Clara. "Therefore, the Court of Appeals must now decide which verdict stands."

For investors, the verdict was already in. Shares of AMD rocketed to $28.875, up $6.125, on the New York Stock Exchange. In Nasdaq trading, Intel's stock closed down $1.50 a share at $70.125 after having traded as low as $68.25.

The nine jurors weighing evidence in the seven-week trial unanimously rejected Intel's claim that AMD had infringed a copyright on the outmoded "287 math co-processor," a chip that speeds a computer's ability to crunch numbers.

They sided with AMD, which maintained that Intel had granted AMD the right to copy the 287's microcode in a 1976 cross-licensing agreement. (Microcode is software built into a chip that defines the sequence of steps required to execute each instruction.)

In the 1970s, AMD was Intel's favorite backup manufacturing source for the chips. But in 1990, after AMD announced that it would produce its own math co-processor using Intel's microcode, Intel sued.

When AMD later used Intel microcode in making its lower-priced clones of the bigger rival's 386 and 486 chips, Intel again took AMD to court. Those proceedings are still under way. The Thursday verdict, analysts said, sets a precedent on microcode use that will aid AMD in those cases.

Intel, which has enjoyed huge profits with its near monopoly, faces a wave of competition from others as well as AMD, including Cyrix, Texas Instruments and Nexgen, which plans Monday to announce a new microprocessor in the same class as Intel's hot new Pentium. AMD has its own such chip, the K5.

The verdict, Sanders said, means AMD can continue to ship 386 and 486 chips based on the Intel microcode. He projected that AMD will sell more than 900,000 of the 486 chips this quarter, up from an earlier estimate of 700,000. They are used widely in desktop and portable computers.

Sanders said AMD has spent a "horrendous" amount--more than $100 million--on the Intel legal battles. He referred often to "throwing out the olive branch" to Intel, saying it was time to get on with things and compete fairly.

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